The foreign exchange market is the most liquid and vast in the world. In 2019, traders exchanged an average of $6.6 trillion per day, according to Statista data. What is more, thousands of new traders join the market every single month. Among all these traders, there are human participants and forex robots. Either way, all of these participants interact to play out this phenomenon called forex.
Just like any typical market, there are the experts that make much of the profits, and the novices that keep hoping for a better day. However, another kind of novices exists that is unwilling to lose its capital every waking moment. What do they do? They opt for managed accounts where they stand a better chance at earning a penny. Unfortunately, the convenience of such accounts is costly.
A little bit of background of managed accounts
Precisely as the name implies, this type of account entails outsourcing the decisions related to trades. Let us assume that you are an aspiring forex trader but with limited knowledge of the market. However, you are serious about profit-making, and you will not leave anything to chance. Friends have advised you to use a forex robot, but you are unsure where to begin. So, you decide to open a forex trading account, but you hire a professional money manager to run it.
The significance of using a professional to run your account is that the probability of profit-making is higher. Normally, professionals use advanced tools like forex expert advisors and advanced forex charting tools to find trading opportunities. With the tools, they execute orders at the optimal prices hence earning more significant profits.
Besides, professional money managers have extensive knowledge of the market. It means they can easily spot trading opportunities ahead of time. Above all, you get to earn an income without lifting a finger. Nonetheless, this convenience attracts a high premium. This article explores whether the accounts are worth the premium or not.
Are these accounts worth the premium they charge?
To be sure, managed accounts sound great, especially to newbies who have made losses to the point of giving up trading altogether. However, the premium that these accounts charge will be unjustified if one can earn the same income through algorithmic FX trading. The following are some reasons why the managed accounts are better.
The first and most crucial benefit of managed accounts is that you get to earn passive income. Indeed, the idea of earning regular cash without shifting hair is excellent. Admittedly, FX expert advisors enable traders to automate the majority of their activities. However, the rule of thumb is that you must keep checking the system to ensure that it is working as told. On the contrary, professional money managers are humans who have extensive knowledge of the market. It means you need not check up on them unless they request your attention.
Forex traders have access to the best forex indicators with which they can devise the best strategy in the market. Unfortunately, the ability to harness the full potential of these indicators rests with experts only. It means newbies cannot count on the indicators and other tools for automated trading to earn returns.
Professional money managers have been in the game for a long time. They understand every nook and cranny of the market, and they can almost smell a profitable trading opportunity from a mile away. It implies professional money managers guarantee returns for their clients.
Security of funds
Another reason that makes managed accounts worth the premium that they charge entails the security of funds. Undoubtedly, the forex market has the largest infestation of con artists whose aim is to defraud unsuspecting individuals. Primarily, this situation comes about due to the lucrative nature of the market. For example, swindlers may trick you into opening a trading account and then make away with your money.
On the contrary, brokers that offer managed accounts have the highest levels of security in the market. Firstly, there is a management agreement that you sign before the relationship is official. The purpose of the agreement is to ensure that the relationship between the parties is purely professional. Also, the agreement is enforceable, which means you can get legal redress in case of a problem. Secondly, the professional in charge of your account does not have access to the withdrawal or deposit functions. Therefore, your funds will remain untouched all the time.
Granted, the forex market is vast and challenging for the majority of new traders. It could be the reason why some newbies drop out immediately. However, professional money managers offer to help through managing the accounts of such traders. The arrangement is the best because you get to earn returns without lifting a finger. Even though managed accounts are pricey, the security that they guarantee makes it worthwhile.