subject: 7 Vital Tips For Finding A Profitable Forex Managed Fund [print this page] Investing in any market or asset class is a serious business and requires serious consideration and due diligence. Here are some vitally important points you need to take into account when deciding on where to invest in any managed forex fund.
The Company
If you are about to invest a significant sum of money you need to be confident that the company is who they say they are and is in fact a real company, with real people you can talk to on the phone. If you are about to invest $50,000 for example you want to make sure that you can talk to someone about any concerns you have or may have in the future. A company should be able to provide a point of contact to answer these concerns.
Initial Capital Requirements
The minimum starting balance for forex managed accounts varies greatly. Obviously this needs to be a consideration when choosing a managed forex account. Many high end forex accounts have a starting balance of $1 million. Find one that suits your budget and start with the minimum and get a feel for their trading and see if you are satisfied with the results.
Past Performance
Perhaps the overriding consideration when choosing a managed forex provider is their results. Have they been able to achieve consistent long term growth? The key point being consistency. It isn't a lot of help to you if your provider makes 50% one month and then loses it all the following month. You need to look for consistent results across a period of time of at least 2 years. Over a 2 years period you would expect that the trading system they used would have been exposed to a wide range of market conditions and if their results are consistent then you can be reasonable safe in assuming that their trading methodology is sound. Of course the markets being what they are future results can never be guaranteed.
Costs And Commissions
Before you invest you also need to make sure you know exactly what the costs are in terms of commissions and fees you have to pay. Typically you will be asked to pay a commission consisting of a percentage of profits gained, anywhere from 15-50 percent of new profits. On top of this percentage it is possible you may have to pay an annual fee based on a percentage of the balance as well as a fee based on turnover or volume. Make sure you have a thorough understanding of what the fees are, how they are applied and whether or not they are based on rewarding actual performance or simply based on the volume of trading. Obviously you want to make sure that the money manager has some incentive for good performance rather than for simply making large numbers of trades, otherwise known in the industry as "churning". I would suggest a performance fee of up to 30% based on achieving new profit highs is reasonable.
Control Of Your Own Funds
One of the most important factors with Forex Managed accounts is being in control of your money at all times. When it comes to the actual funds for trading deal directly with a reputable broker and do not send your funds directly to any money manager, no matter how qualified or honest they appear. Any bona fide managed account provider will provide this functionality and not ask you to send funds directly to them.
Total Capital Under Management
How much money do they have in trade? A well established and growing capital base is a good indication of just how good a money manager is. If a fund or managed account program is well capitalized it is a fair indication that astute investors with larger accounts are sufficiently satisfied of the funds long term prospects and its investment philosophy.
Trading Style and Money Management
Give some serious consideration to the trading strategy employed by the forex managed account provider. Satisfy yourself that their trading style and their money management is consistent with your own risk tolerance and make sure that the provider does actually trade according to the guidelines they stipulate. Often you will see providers claiming to risk 1% per trade and actually using 10 or 20% risk per trade whilst trying to recover from losses. This is a very dangerous practice so make sure you are aware of the methodology used and that they comply with it.
The Broker
Which broker you choose can be critical in determining whether or not your managed forex experience is a profitable and pleasant experience of a complete nightmare. From experience I can say that which broker you choose needs to be uppermost in your considerations. Do your homework on the broker and make sure they can deliver competitive spreads and commissions.
