Why Managed FOREX?
As mentioned in the Introduction, investing in currencies, if done correctly, may be the ideal market for the current global economic and financial environment. Currencies are appealing because one has the ability to potentially profit from events in every corner of the globe.
But selecting a managed account and FOREX manager takes some real work and due diligence. Things are not always -- perhaps not even often -- what they seem. It is a fast-paced market with enormous profit appeal. Such a situation attracts both the best and worst types of people.
Beyond reading this, conduct some independent research. When you find a group of managers who seem to be good possibilities, you will want to first analyze their performance and then carefully perform your due diligence on each of them.
Tip: How FOREX managers react to the due diligence effort may tell you a great deal about them. If they are skittish about providing all the information you require or are not accessible, that cannot be a good sign -- no matter how inviting their track record and performance looks on paper.
Pros and ConsThe primary pro -- a manager is a professional trader. He devotes all of his working time to currency trading. At least in theory, these pros did not become successful managers by doing a poor job of trading. That said, money managers, like traders, do come and go for a variety of reasons.
The primary con -- you lose control of your money. Yes, if things do not go as you expect, you can close your account. But many people, especially those who have traded on their own, have a psychological block against handing over a goodly sum of money to someone else. Especially someone they do not know well or personally. A hearty due diligence can at least partially salve this uneasy feeling.
If you learn to trade on your own you can accomplish everything in small steps and bites. When you hire a manager and open a managed account, it is one fell swoop. Sure, you can start small, at the manager's minimum and build up as performance meets or exceeds expectations. But you still must write that first check or send the first wire.
By Michael Duane Archer