subject: Possible risk controls in the forex? [print this page] Possible risk controls in the forex? Possible risk controls in the forex?
More people will be interest with trading due to the e-forex industry growing. The former head of foreign exchange trading in the Asian region of a major financial institution who has managed billions of dollars in the forex market was caught saying that the problem lies in the track record.
You have to find an advisor with at least a three year audited track record or a verified profit and loss statement from a major bank. You might be lucky and get a leverage of 100 to 1 from your e-forex broker.
Fees for managed e-forex accounts are similar to other managed accounts. You will also have to pay 2% of the account balance per year for the management fee, a 20% incentive fee on new equity highs and a small transaction fee Aside from that here are some other questions you can ask a prospective money manager on how he will handle your e-forex account.
Number one thing to ask is what percentages of trades occur during the day session. There is opportunity to trade when the Asian session opens at 7 p.m.EST, Europe at 2 a.m.and the United States at 9:30 a.m. Sometimes the market will show that not betting at all is a good move.
Make sure you also ask about the percentage of the trades went down by more than 50% before recovering to break even or profits. It is not hard to tell that when you use money managers with low drawdown is that you also have lower expected returns.
Keep in mind that the next question to ask is what intermarket indicators the money manager studies. If you find out that the manager does not look at the dollar index, the major stocks exchange markets, gold and oil then ask why.
Be sure you are aware of what has been the manager's worst trade as well. A good manager is always one that already has good defensive skills.
The fifth question you want to ask is how much of the profits the manager reinvests. You will have to find out if the manager redistributes say 10% of every week's profit, if there is any, to a separate segregated account. In case risk is controlled as the principal is returned to you.
What his strategy is for worst case scenarios is the next thing you want to ask. There are cases when an account will just be stubborn and not move. These cases would call for rotating to new currency pairs.
Ask your manager what return can you expect as well. If you get an answer to this question, reconsider retaining the manager. Always be careful if he says he can accomplish the latter.
