Should You Get a Managed Foreign Exchange Account?

Managed Foreign Exchange Account

This article looks at whether or not you should get a managed foreign exchange account.

There are a lot of traders who consider the use of a managed foreign exchange trading account.  If you are considering this type of account you need to know what this entails.  You have to look at the types of managed trading accounts that you can get, the capital you will need for the account and the type of trading that will be done.  Once you know all of this you will be able to determine whether or not the managed foreign exchange trading account is the right one for you.

The Types of Managed Foreign Exchange Accounts

There are two types of managed trading accounts that you can get.  The first is the pooled account and the second is the individual account.  The difference between the two accounts is the number of traders who are going to be part of the account.

With the pooled account you are going to be sharing a single account with a number of other traders.  All of the traders who buy into the account will invest a set amount of money.   The profits that are made with this pooled capital amount will then be divided among all of the investors.  Investors who have a higher risk tolerance will get more of the profits than others.

With the individual account you are not going to be sharing the account with other traders.  This means that the account will only use the capital that you provide for trading.  All of the profits that come from the trading account will be given back to you.

The Capital You Need

The amount of capital that you need to open the trading account will vary depending on the managed account you are going to get.  The pooled account will need less capital from each of the investors.  This means that the individual account will need a lot more capital.  There are some individual managed accounts that require a minimum deposit of $10000.  There are also some pooled managed accounts that require a deposit of $5000.  You need to determine whether or not you have the capital that is needed to open the account.

As with all trading on the foreign exchange, you need to use capital that you can afford to lose.  This amount is often more than the retail trader is going to have and this is why many of them do not opt for a managed trading account.

The Trading that is Done

The trading that is done on the managed trading account is determined and completed by the account manager.  This means that you are not going to be trading at all when you have this kind of account.  If you are looking to actively trade on the market then this is not the right account for you to open.

The account manager should offer you a summary of the trades that are being competed.  There are some accounts that insist that you need to request this information.  If you are not happy with the trading that is being done then you will have to leave the managed account.



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