Lesson 1: The Risk of Forex Managed Accounts

Trading managers can be a big help for beginner investors and traders who want to have a passive income. However, a legit forex account manager is more of an exception than a norm. 

But let’s say you’ve landed a legit one, you’ll still suffer from the high fee these managers are going to charge you. It’s hard to master the market, they’ll make sure to capitalize their expertise. 

In this lesson, you’ll learn how a forex account manager works and the associated risks in hiring their service.

Lesson Highlight

• A forex managed account is a service provided by professional traders to individual investors who want to hire someone to trade on their behalf.
• While there are legitimate forex account managers, scam managers are still prevalent in the market. To avoid getting scammed by account managers, a trader must verify regulatory compliance and ask for track record.

How Does Forex Account Management Work? 

Profiting from the forex market would take time and effort. It’s a constant education and has an insane learning curve.  

And let’s face it; not everyone’s willing to go through all the hassle. That’s when the financial account managers come to play. 

Account managers allow you to profit from the forex market without doing anything – just hire their service, chill down, and get your passive income. Anyway, these are professional traders we’re talking about. 

What they do is they let you deposit your capital, and they’ll do all the work of buying and selling in the most optimal points. 

However, you should remember that you bestow them the discretionary power over your capital. All their actions must be based on their own strategies and practices and won’t even bother consulting you. 

What To Ask When Choosing the Best Account Manager 

Being picky is just wise when you’re looking for your trading account manager. No trader should trust their money to a total stranger– so is you. 

Remember, scrutinize them as much as you can and want. Here’s your reference on what to ask your trading account manager. 

1. Track Record 

The first thing you should look at from your account manager is their track record. This is like asking a portfolio to your employee.  

Doing so wouldn’t only prove their legitimacy but also their credibility to do the job, which is to meet your financial goals and needs.  

Look for a consistent account manager that would bring you sustainable returns over a specific period of time.  

Here’s what to ask to your account manager:  

1. Can you provide details about your past performance as an account manager, including your average annual returns over the past several years? 
2. What is your maximum drawdown and how do you manage losses? 
3. Can you provide references or testimonials from previous clients? 

Pro Tip: Beware of account managers that promise high returns with little investment and risks.  

2. Trading Practices

Hiring a trading manager doesn’t mean you shouldn’t care about the trading practices your investment goes through. You must know if their strategies and techniques align with your financial goals.  

Remember that despite the legitimacy of the account manager, you won’t get your desired financial results if their practices are not right for you.  

Here are the things you should ask to your account manager:  

1. What is your investment strategy or trading approach? Are you a discretionary trader or do you use algorithmic trading systems? 
2. How do you determine the risk/reward ratio for trades? What risk management techniques do you employ? 
3. Do you have specific criteria for selecting investment opportunities, and how do you conduct research and analysis? 

3. Regulatory Compliance

You should never trust your money to an unregulated account manager. One thing you need to look for is whether they’re from a forex company. 

If yes, the company they’re under must be regulated by a trusted regulatory body.  

1. Are you licensed or registered as an investment advisor or portfolio manager with the relevant regulatory authorities? 
2. Can you explain how you comply with regulatory requirements regarding client funds, disclosures, and reporting? 
3. Do you have any disciplinary history or regulatory sanctions? 

4. Communication Practices 

You trusted your money to someone, so it’s important to always be informed about what’s going on with it. As we all know, money doesn’t grow trees; it doesn’t come freely. 

You would want to know about your investment portfolio's performance and any changes made to your account. 

With that, you should look for an account manager that has accountable, reliable, and established communication practices. 

1. How frequently do you provide updates on account activity and performance? 
2. What methods of communication do you prefer (e.g., email, phone calls, in-person meetings)? 
3. Do you offer regular reports or statements detailing account performance and transactions? 

Downside of Trading Account Manager 

Although convenient and enriched with expertise, there are several downsides you must consider when you hire account managers.  

1. Potential Fraud: A scam account manager is, unfortunately, common in the financial market. Make sure your account manager is regulated and has a sufficient track record. 
2. Lack of Control: When you entrust your investment to your account manager, you shall expect no control over the way they trade your investment. This may be an issue if your financial goals don’t align with your account manager’s practices.  
3. Manager Fee: Trading account managers are professional traders, and they make sure to compensate for their expertise in exchange for your convenience. Manager fees often range between 20% to 30% of your trade’s earnings or your deposit.

Okay, you’ve the risk of the forex account manager. Although this may not always be a scam, you can still expect a headache and investment losses if you hire an account manager.

In the next lesson, you’ll learn the common notorious scams you may encounter, and what you can do when these unfortunate events happen to you.