When you are new to foreign exchange trading, it is challenging to understand the currency movements or the analytics used for trading. Furthermore, it is even harder to predict how different aspects influence the financial markets or establish how to handle leverage or when to enter or exit a position for good returns. These reasons and more make some investors look for professional brokers to trade on their behalf using managed accounts.
Suppose the owner of a forex trading account has a thorough understanding of market behavior. In that case, they may be in a better position to determine if another person would perform a better job trading the foreign exchange market than they could do themselves. It may be advantageous for both novices and the more experienced traders to open a forex trading account with a reputed forex account manager.
How a Trading Managed Account Works
The first step to opening a managed forex trading account will be to look for a broker that offers such services because not every brokerage does so. The broker then opens an account for the investor. The investor deposits some money into the newly created account for the trading to begin.
Before trading begins, the investor and their financial advisor sign a legal agreement called a limited power of attorney (LPOA). The legal agreement seeks the investor’s permission for the account manager to trade on their behalf.
The consequence of granting this permission enables the account manager to link their account with the investor’s account. It also ensures instant copying of any transactions carried out on the master account of the manager over to the account of the investor.
Even though the investor’s account is under an account manager, only the investor can have complete control and access the trading account. Investors may see their account balance at any time, as well as the daily trading activity. They can withdraw or deposit money anytime they want without incurring any penalties.
Pros and Cons of Using a Forex Trading Managed Account
Opening a forex trading account may also be an ideal option for investors acquainted with the market but are conscious of their limits as traders or are too busy to trade. As such, they prefer that professionals manage their trading accounts. Trading using a forex trading managed account offers significant benefits, but there is always the possibility of disadvantages.
Pros
Amongst the most significant benefits of a managed trading account is the expert help provided to you by the broker or brokerage firm. If you are a novice trader, it can be extremely challenging to succeed in the foreign exchange market. Sometimes, it may require trading for a few years until you are confident enough to trade independently.
Using the services of an account manager enables you to delegate the management of your transactions to a qualified and competent forex trader who takes care of everything on your behalf. You can choose to do other things without having to worry about your investment.
Using the services of a trading account manager also enables you to begin trading right away without learning about the technicalities involved in the Forex market for months on end. It will also allow you to reduce the time required to understand your trade and begin generating money almost instantly after you begin trading.
Managed forex accounts save you valuable time because all you need is to set up your account, and the account manager will handle all the trading transactions.
Cons
Some brokers charge a certain fee for every transaction, while others charge a fixed price. Whichever way, opening an account with an account manager will require you to spend a substantial sum of money. You also have to determine whether using the services of an account manager will be worth what you spend to open and maintain the account.
Trusting someone else to trade on your behalf means you will have no control or influence over the transactions. You are putting your whole investment in danger in the hope that the account manager will make profitable trades. Suffice to say; you may also be looking at significant losses.
Wrapping up
Forex trading has the potential for both loss and profits, which is why some prospective traders choose someone else to trade on their behalf rather than take on the risks by themselves. Before you think of allowing an account manager to run your trading transactions, you must ensure that they are the right ones, with a reputation to protect. A forex trading managed account has many benefits, but you should not forget about the drawbacks.