Managed trading accounts are exactly like they sound. Trading accounts in which the trader contributes the capital, but the management aspect is performed by a Forex professional and not by the trader. When opening a managed account, the trader specifies the goals for the account, and the account manager attempts to reach those goals. There are two primary types of managed accounts:
Pooled Funds: With this type of managed account, your money is put into a mutual fund with the capital of other investors and the profits or losses are then shared. These accounts are categorized according to risk tolerance. A trader looking to make more money in a shorter period of time, will choose a managed pool fund account with a higher risk/reward ratio, while a trader looking for a more steady income will do the opposite.
Individual Accounts: These are of course accounts that are managed on a more individual basis and not in a collective pool of funds.
Pros:Professional Assistance: No matter how long you have been trading Forex, there are people that have been doing it for longer. It is always important to listen to other people's opinions on the market, especially when they are well known experts in the field. With managed accounts, you can generally count on the fact that your money is in the hands of an experienced Forex trader that will make educated decisions on what to do with your money and when.
Freedom: Having your account managed by someone else leaves you the ability to gain from the Forex market without having to spend the time trading. You can spend your time doing whatever it is you do and rest assured that the experts managing your money will do everything in their power to help you see gains.
Cons:Price: This type of account comes at a very high price. The luxury of profiting from the Forex market while spending virtually no time doing it, will set you back $2,000 for a pooled account and up to $10,000 for an individual account.
Lack of Flexibility: It is true that if you choose to have your account managed by someone else, chances are you do not want to or know how to do it yourself. However, with this type of account, you have very little flexibility to get involved. If you do for whatever reason want to open a position you think is a smart one, you will have to count on the account manager to see that position and make the smart decision. Having your account managed leaves you very flexibility.
The Forex market is a very popular and up and coming market. Many factors contribute to that popularity, with the primary one being its potential for profit. However, it is always important to remind yourself that that very same potential presents a grave danger, that if not managed properly can devastate even the most experienced trader. The first step in managing your Forex trading is choosing the suitable type of account based on your existing capital and risk ability.
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