Selecting a Forex Account Manager

Some people reading this may be tempted to click away to something else, either because they have had a raw deal in the hands of quack forex account managers, or they have been inundated with horror stories of how forex accounts have been blown by some unscrupulous forex account managers.

However, forex account managers exist because there is a need for them. Not everyone will have the time or the opportunity to go through the rigorous and sometimes lengthy training required to gain proficiency in forex trading. Some others are better off doing something else with their time, but would like their money to work for them. This is where forex account managers have come in.

Top Forex Account Manager Services:

• Compass FX
• Forex NA
• Cash Monsterz
• Forex Wink

The problem that has existed in this niche is due to the following reasons:

1)      There is very little regulation of this forex niche.

2)      Many people entrust their hard-earned money into the hands of people whose proficiency is in question and is unproven.

3)      A market in which $4.2trillion changes hands will surely attract crooks of all kinds whose sole aim is to cater to their own interests and not necessarily that of the client.

You must have all heard the term hedge funds. Hedge funds are simply a mega trading account, in which high net-worth investors have pooled funds together and handed over to trained and competent account managers. When George Soros pulled off his $1.1billion profit trade by shorting the British Pound in Black September 1992, the trade was pulled off from his hedge fund, a type of forex managed account. So forex account managers are not a bad thing. The challenge is in getting the good ones. In order to achieve this, every retail trader who wants to use a forex account manager needs to know how to separate the good ones from the bad and the ugly.

Regulation

Forex account managers must be registered as fund managers of some sort under the regulatory agency of the country in which they operate. The essence of regulation is to safeguard the clients by making sure that the forex account managers actually have the skill and professional qualifications to do what they say they can do. They must also have some level of financial backing to compensate customers if the need arises. Most importantly, traders need to be assured that the forex account manager is not a briefcase/fly-by-night operator who will simply disappear with their money.

Track Records

Competence as a forex account manager can only be measured by the track record of the manager’s performance. Performance should be measured over a long period of time, ideally a number of years.

Risk Assessment

When talking with a forex account manager prior to doing business with them, find out how much risk they take in their trading activities. Some forex account managers take on too much risk, and only get away with it because they trade with loaded accounts that can withstand such drawdowns. A trader who does not have a very large amount of trading capital may not survive risky trades. Recently, JP Morgan announced that some of its trading positions were in loss positions to the tune of about $2billion, but the positions were still active as at the time the announcement was made by JP Morgan’s CEO. Can you afford to sustain such unrealized losses if they are incurred as a result of a forex account manager’s high risk trading strategies? Get a forex account manager whose style of trading has a risk profile that can match your risk appetite.

Before you make the final decision to select a good forex account manager, make sure you do a very exhaustive due diligence before you make the commitment.