The Truth about Managed Forex Accounts

by Peter Marsden, www.forexpm.com

After spending some time reading various public forums, it is clear that there is a lot of demand from investors to diversify away from the traditional mutual funds into managed forex. Some people just seek high returns on their money through someone else's forex trading. Unfortunately, the truth is the vast majority of managed accounts are negative after 12 months, many even receiving margin calls before the 12 months are up.



There are a very large number of managed accounts out there now. Even a simple google search will provide many traders offering their services. “Over 95% of traders lose money”. This statement is certainly no different when it comes to managed accounts. Many traders offering managed account earn commissions for every trade they place on your account, even the bad ones. This enables the trader to get live trading experience with no risk to his own money (because he is risking yours) and also gets paid flat commissions. A win win situation for the trader. A bad deal for your money.

Other Managed Accounts take a percentage commission based on the performance. A monthly performance fee is definitely better suited to the trader. Lets say a trader earns 3% per month for 11 months, he picks up nice commissions every month, but say he then loses 50% in month twelve (may seem unlikely but I have seen many Managed Accounts face a similar fate) your account will be lower than its nominal value but the trader will still have made nice amounts on the commissions. If however the commissions were on an annual basis. You would not have to pay anything.
Conclusion
Most managed accounts really are not worth your time, it is sad, but it is true. Most will fail and lose some or all of your money. However, on a brighter note there are managed accounts out there that have beaten the stock market in the long term, but they take a lot of finding. Do your research, never give control of your money to anyone lightly.


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Peter Marsden manages a blog about forex trading strategies

Published at Sep, 22 '07 ; read 540 times;

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