How Does a Forex Managed Account Work?

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In the Forex market, a managed forex account refers to a method of investment, where an account owned by an investor is traded by professional traders on their behalf. In other words, it’s a combination of currency securities which the investor owns and is managed by a highly-skilled fund manager or trader. The main objective of the best forex managed account is to use the trader’s skill and experience to earn some profit from the market, with the trader getting a pre-agreed fee or commission.

This method is ideal for investors who want to participate in the foreign exchange market yet do not want to invest time or skill in the actual trading process. They usually provide the substantial capital required for this method, in the hope of making some big eventual gains.

How do the Best Do Managed Forex Accounts work?

The best Managed Forex Accounts usually have a drawdown limit integrated. This is done to control the trading, where it will cease if the drawdown reaches a certain level.  This drawdown limit can be adjusted in certain managed accounts, allowing them to freely set their own risk profile.

Account providers charge the investor a fee, usually based on profit reached by the account in question.  No performance fee is charged if no profit is generated in a month, or the profit doesn’t exceed the previously agreed upon profit level. The charges set by different companies vary, from 25% to 50%.

For individual traders, forex fund management for these managed forex accounts is a superb way to earn some income. For investors, it serves as an attractive hands-off investment requiring little knowledge or technical skill. The starting capital requirement also differs depending on the broker chosen. It can be anywhere in the range of $1000 to upwards of $50000. Many investors express concerns pertaining to who controls the trading account because of the substantial investment involved. In this respect, managed forex accounts hand over complete control to the client. The client has the sole permission of depositing and withdrawing money from the account whenever they wish. They can even close the account, provided there are no open trades at that point.

The broker and the trader can only access the client’s account only to place trades for them and withdraw the performance fees, as agreed upon in the Limited power of authority signed between the two parties. On the other hand, the client cannot access functions on the trading platform used by the trader. He/she can instead view the platform in the view-only mode as orders are placed in real-time.

Why One Should Get a Managed Forex Account

  • Fewer Elements of Risk: Forex managed accounts that are offered by reputed brokers allocate the investor’s substantial capital to professional traders. These traders or fund managers as they are often called are experienced professionals who have the required skills and knowledge to generate profits, even in less than ideal conditions.
  • Better ROI: Compared to other methods of investment used for earning passive income, such as bank savings and other schemes, putting money in a forex managed account is more profitable especially if it’s with a reputed broker. Various financial studies have concluded that it produces 10 to 15% more profits than traditional passive income sources.
  • Easier for Clients to Deal With: Investors who have a lot of capital but do not have the time or knowledge required for active trading, can instead avail managed forex accounts. They do not need the skills and experience to earn big, allocating the responsibilities to the brokerage and the fund manager. This helps people already involved in full-fledged jobs or occupations, to earn some passive income with very little effort.

Conclusion

Using a managed forex account can be a pretty helpful tool for earning substantial gains over a period of time. However, it should be noted that success depends largely on the type of brokerage chosen and the skills of the fund manager. To reap the full benefits of this method, clients should first conduct some research and shortlist brokers, before choosing one. Failure to do this may result in the client selecting the wrong brokerage site, with dire future consequences.

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