Managed Forex Trading Accounts
What are Managed Forex Trading Accounts? The current trend whereby everyone now wants to earn an extra coin has seen many people venture into the currency market. As a result, the urge to create an independent investment strategy while bearing less risk has brought the popularity of online managed accounts. The following is more information on the said accounts.
What are Managed Forex Accounts
Managed Trading Accounts are accounts owned by an investor who in return hires a professional manager to run the same account. Managed trading accounts offer a decent solution to those that lack enough time or adequate knowledge to trade in the currency market.
Types of Managed Forex Accounts
The three types of managed Forex accounts are:
Personal Managed Forex Accounts
An investor may acquire an account after hearing about the potential of forex trading as an investment tool. However, such investor may lack the necessary skills or time to trade. As a result, the client may hire a pro to manage the account for a fee. The relationship between the owner and the manager may be informal or semi-formal while the compensation for the management services are usually negotiable but not fixed. An account that is owned by a client but run by a professional manager is known as a personal forex account.
Company Managed Forex Accounts
Some companies offer managed forex account services. Such companies pool together funds from several investors and trade them in one central account. The relationship between the account owner and the managing firms is usually formal. The charges for the services are constant, and there is no sharing of profits between the company and the client.
Permanent Allocation Management Module (PAMM) Account
In this kind of account, a manager opens a PAMM account, allocates a certain amount of money as his initial investment which he is unable to withdraw. The manager then designs a proposal for investors which includes the terms and amount of compensation. PAMM accounts attract investors who invest their money and becomes partners. The manager continues to trade in the PAMM account using his money and that of the investors. The rate of sharing of profits or losses depends on the percentage of the investment for both the manager and the partners. The investors then pay the manager’s service fees from their profits.
Modes of Forex Account Management
The method of account management can either be manual or automated. Manual forex account management is whereby a human being scans the forex market, identifies profitable currency pairs and then makes informed decisions on whether to trade or not. On the other hand, automated account management reviews market activities using computer-based programs and algorithms. The software considers key signals and locates profitable currency pairs before trading on them.
Advantages of Managed Forex Account
Alleviates the Chances of Learning How to Manage the Account
To manage a Forex account optimally, you need to gain education on the field. The learning period takes too long thus delaying the time you take to earn profits. When you hire a professional manager, there are high chances that you will start earning profits instantly.
Managed Accounts Relieve Owners of the Emotions Involved in Trading
There is emotional stress attached to forex trading since money appears and disappears from the account with each win or loss. Making use of managed forex accounts relieves one from such stress.
More Time to Focus on Your Career
Currently, many people are running more than one job to make ends meet. Hiring a trader who is in a position to devote into trading for clients gives account owners the autonomy to concentrate on other kinds of work.
Most account managers are experts in trading and management. By hiring them, one gets a chance to earn high interests.
There are many risks associated with forex trading. Due to experience, account managers can make more informed decisions as compared to owners that lack the expertise to deal with forex accounts.
Disadvantages of Managed Forex Account
A professional manager may provide excellent services and may also help you to make high profits. However, one may choose to discontinue rendering his services to you or something bad such as sickness can happen to him. In case person dies, the skill also dies with him.
Expensive to run
Managed accounts are costly to run compared to individual accounts since they require high capital. One also has to pay for the services either monthly or yearly.
In case you see the market moving, you will not have a chance a position to trade. Managed accounts make one rely entirely on the account manager.
Most account managers may pay less attention to the money they are entrusted to handle. As a result, they may miss important opportunities or end up ignoring minor losses.
Lack of Opportunity to Learn
When owners assign the responsibility to run the accounts to owners, they deprive themselves a chance to learn the Forex market. As a result, they entrust the responsibility to make important financial decisions that they would make if they had the knowledge to the account managers.
Managed Forex accounts are an avenue to earn an extra coin to people who lack enough time or the expertise to trade. However, it is important to conduct a thorough analysis before settling for a manager. Good managers provide one with reports, tools, and tips to help in understanding the market.