Thinking about opening a managed forex account?
You are in the right place. Here we will not only provide you options of the best managed forex accounts to choose from including some top pamm account brokers, but we will also help you answer a key question. That question is, how do forex managed accounts work?
In this guide, you will find out exactly that, and more on what you need to know about opening a managed account, and trading through a fund manager.
Let’s take a closer look.
Table of contents
How does trading work on managed accounts?
Here we will look at the basic points of how trading works on a managed account where you deposit funds and have a fund manager trade the market on your behalf.
Open an account with the broker
The very first step with a managed account is to find a reputable broker. You should ensure this broker is well-regulated by a top-tier regulator like ASIC, CySEC, or the FCA. From the homepage of the broker, the process can be completed very quickly.
All you need to do is follow the on-screen instructions to register, and verify your account by uploading a proof of ID, and proof of address. In all, you can be done in 10-15 minutes.
You can read our selection of the best Managed Forex account to help you find a top broker from the outset,
Find the fund manager
Once you have your broker account set up and have selected a managed account type, you will need to find yourself a fund manager to trade.
The key points here are experience, past performance, and attitude to risk. These core points are generally tracked by a variety of charts and statistics by brokers so you can make the best choice for your needs.
When you are happy with your choice, sign a limited power of attorney with the manager to allow trading on your behalf with the agreed fees and conditions, and you are ready to start.
Fund your account
The only real thing left to do is fund your account. For this, simply deposit your funds according to the methods your broker makes available. You can then allocate an amount of funds for your managed account.
Let the fund managers earn you profits
With your funds allocated, the fund manager can set about trading. Remember, they will have trade-only access and you still remain in control of your account, its depositing and withdrawal process
Is a managed account worth it?
Whether a managed account is worth it or not really is subjective. This depends on your own feeling and approach to the market.
If you don’t have time or the experience to trade, and want to leave it to a skilled professional, then a managed forex account could be a great choice.
On the other hand, if you don’t like being out of control, have only a relatively small amount to deposit, or don’t know what to look for in a fund manager, a regular account may be a better choice.
Managed Accounts: What are the safety and costs
You may be concerned about the safety of a managed account. If you are trading through a well-regulated broker though, there is no need to be concerned.
Everything, including all the conditions and fees, should be set out in your legally binding LPOA agreement. This also helps protect you. Each fund manager may set their own fees and conditions such as minimum deposits and early withdrawal fees. It is up to you to research and be aware of these.
Typically, a percentage fee on profits to the fund manager will often apply. For some of the best managers, this could be as much as 20% to 30%. Another positive in terms of safety is that your fund manager will only ever have trade access. This means you retain full control over the other areas of your account.
How to find the right fund manager for you
As mentioned above, finding the right fund manager for you is critical. This means someone with knowledge and experience that you are happy with. We typically recommend that they should have at least 3-years of experience.
You will also be able to check out their past performance statistics in good detail with the majority of brokers. This can allow you to choose a consistent performer while also evaluating their approach to risk by looking at things like the maximum drawdown levels, and calmer ratio to help you find someone who matches your needs.
Finally, it is always key to double-check the fees, any minimum deposit requirements, and other conditions.
How do Forex Managed Accounts Work FAQs
How does account management work in forex?
In the forex market, you can invest in a professional trader to trade on your behalf. Brokers offer this possibility and by signing a limited power of attorney (LPOA) you let a trader manage your account by giving trade-only access to your own account.
Can someone manage my forex account?
Yes, you can find a fund manager to trade on your behalf. The fund manager is usually a professional trader with years of experience trading the forex market. The manager may use your account for trading but is unable to deposit or withdraw any funds.
About the Author
Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world.
A trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.
He is a keen golfer with a very high handicap so when not helping you find the best broker for your needs, you may find him on the course or just as likely following any number of sports from the comfort of his sofa.