Forex managed account is a type of account which is actually owned by the retail trader but the retail trader does not operate it. He usually lets an experienced broker of a professional operate this account on his behalf. How this works is pretty simple. The retail trader opens a forex managed account and then gives a pre-approval to the expert broker to do buy or sell transactions on his behalf. Forex managed account can be thought of like a mutual fund where you give the money to the fund manager who invests the money for you.
There are hundreds of financial institutions who are in this business of operating managed accounts. These companies would usually hire people who are experts in the field of forex trading. These experts use their calculated strategies and past experience to make the buy or sell calls. They are able to diversify the portfolio to negotiate the risk and try to leverage the investments so that maximum profits can be taken.
There are various advantages for a retail trader to open a forex managed account. The first reason is that trader need not be an expert to start making money in the forex market. He doesn’t have to go through the steep learning curve before he actually starts to see some profits. These types of accounts are also beneficial for those who do not have the time to track the forex market round the clock. Another advantage is that the retail investor is assured that his account is in the safe hands of a professional who has a good track record. Lastly, he still owns the account and can close the account anytime he wishes.
There are a few disadvantages of a forex managed account as well. The first and the foremost are the fees and commissions charged by the financial institution to manage your account. These can total up to a hefty amount which usually offsets the profit which you make in the forex market. Also, a few companies used automated systems to make the sell or buy decisions which may not be the best way to transact in the forex market.
It is very important to choose the right agency to manage your forex account. It is always advisable to check the past performance. You should ask for references that you can talk to. This is the single most important factor since you are going to hand over your hard earned money to someone to invest in a risky market. Therefore, it is absolutely essential that you take time to research and choose the right agency to manage your forex managed account even if it is a bit expense than others.
