Posts Tagged ‘managed account’

Forex Managed Accounts – Why We Use Them

Forex managed accounts is a popular way of doing forex trading today. There are several companies providing you with this service.

But the question is – is it really advisable to let somebody else manage your trading account? This will be discussed in this article.

It is clear that one of the biggest advantages of using a managed forex account, is that you don’t have to posess a deep knowledge of the forex market. The only thing that is expected from you is to put enough money in your account and then somebody from the service company will take care of everything for you.

One of the biggest drawbacks of using a managed account is the price. It is very expensive. It is required that you make a rather large deposit to be allowed to open an account. Dependent on which company you use, you should count with having to put up about $10 -25,000.

The fees for having a managed account is taken as commission on all profitable investments. Generally the commission is in the range of 30 %. Additionally they will charge a certain percentage of the Bid and Ask prices. On top of this they oftenly require a yearly rate to be paid.

When you try to calculate your ROI, you will soon realize that all those fees will eat your profit up. You will have to have a very good trader that manages your account if you are going to be profitable.

Another thing you should do is read the fine print in the contract! Sometimes they have hidden fees. Else you get an unpleasant surprise when you have already opened the account.

Now this means, that for a managed account to be profitable it has to experience very high profits from every trading position. This is in contrast to when you do the trading yourself. By doing the trading yourself you have cut a lot of the costs, and above all, all costs coming from the managed account.

The problem trading for yourself is that you have to learn a lot about forex trading and this takes time. If you still believe that a managed account is exactly the correct thing for you, there are some things you should consider when choosing a broker.

Find out if the trader is using the same methods for his own trading as for your. If it is a good investor, as all say, they should of course use the same trading methods for his own trading. Ask them about their own portfolio and check how profitable they where. If they can show up a large profit, this is a sign that they are good traders.

Forex robots are getting increasingly popular. Could it be more profitable trading with a forex robot than with a managed account?

The biggest difference between a managed account and a robot is of course, that a person is managing the managed account. In the case of the robot, it is a software telling you how to trade.

Generally, the robots are not so good traders as the expert human traders. But, a robot is much cheaper than a managed trading account and when you consider this fact in your calculation, you will find out that a robot can be much more profitable or at least exactly as profitable as the managed account.

To sum it all up – A managed account may be a noble thing, but it is very expensive and therefore the profit you will experience from it will probably be quite low.

Learning to trade by yourself is probably the best method of getting higher profits. If you don’t want to learn about trading or don’t have the time for it, you could also consider a forex robot. Although the robot has a lower profit per investment and make more investments that will lose money, in the end, due to the high costs of a managed account, the robot can be more profitable than a managed account.