Don’t Want to Manage FOREX Yourself

You may have decided, or will eventually decide, you like the idea of trading FOREX as a complement to your total investment portfolio -- but just do not want to do it yourself. The reasons could be many: not enough time, not the right skill set, not to your personal disposition, or too long a learning curve.

If so, the solution may be hiring a professional FOREX money manager. Money managers have long been in equities as SEC-registered investment advisors. In commodity futures, managers are registered as a CTA (commodity trading advisor) if they control individual accounts, or CPO (commodity pool operator) if they control a pooled interest or fund.
In the United States, a currency manager now comes under the auspices of the CFTC (Commodity Futures Trading Commission) and the NFA (National Futures Association). They are registered and regulated as CTAs and CPOs at this time.

The matrix of selecting a FOREX money manager is substantial. There are many managers now trading, numerous trading methods used, and alternative investable entities to select besides an individual account.

Tip: Remember that the FOREX manager introduces at least one more link in the chain from you to the FOREX broker. If the manager uses a pooled or funded entity, that will add at least one more.

The first step is to consider your own needs, wants, and propensities. How much do you have to invest? How much are you willing to put at risk? Are your goals and profit expectations in line with those risks? Always keep in mind performance and risk are inextricably linked. The higher level of profit you seek, the higher the level of risk you must be prepared to bare.

A professional, managed participation in FOREX makes good sense for many investors. A managed account may be the best method of participation for those with little time to trade or learn to trade.

Consider your own requirements first. Then gather a list of prospective managers and programs. Do a performance review based on whatever information is available. Finally, conduct a due diligence of those who pass through the first two litmus tests. Always consider performance in light of the risks and costs taken to achieve it.

If the manager's broker is not CFTC/NFA registered be sure it has a solid and transparent prime broker and custodial arrangement.

Fraud is more likely to occur in -- but is not limited to -- pooled participations. But do not discount those out of hand. They have multiple advantages, especially to small cap investors. But be sure to do the additional due diligence required; know where you are sending your hard-earned money.
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2020. Content published with author's permission.

Posted in ...