The foreign exchange (forex) market is lucrative, and nobody would want to miss out. However, the market is vast and complex, which means that only experienced and highly knowledgeable traders can earn income. While true, this does not mean that novice traders cannot tap the profit potential of the market. The professionals in the market run managed accounts for the benefit of the less experienced individuals like you.
Is it possible to lose money in managed forex accounts?
Yes. The fact that professionals run the accounts does not preclude them from hemorrhaging funds. To be sure, the forex market is lucrative because of things like leverage, but this can also accelerate loss of funds. Even, incompetent professional money managers can spell doom to a trading account.
However, these are not the only means through which you can lose your money. If you have done some behind-the-desk-research on forex, you must have seen that scams are prevalent. Interestingly, scammers exploit unsuspecting traders who do not take time to understand how the market works before moving in. It is no surprise to find things like forex expert advisors that are nothing more than a joke.
Tips on avoiding losing money when using managed forex accounts
Professionally managed accounts are the best thing to happen in the forex market. In the first place, they opened the market to many more participants. At last, any individual with interest in the market could access comfortable returns without trading. Secondly, the professionals running the accounts have been able to convince forex-skeptics that forex is a legitimate endeavor. Still, there are bad actors whose intentions are to hurt unsuspecting traders. Here is how you can avoid them.
Understand the concept of managed forex accounts
Knowledge will forever be the best weapon for forex traders. Understandably, the market is wide, and it requires some time for new participants to get their feet firmly on the ground. For example, you may need some time to understand the terminologies and their meanings. Fortunately, going will become easy once you have sufficient knowledge.
In the case of managed forex accounts, it is upon you to understand, for example, the difference between pooled accounts and normal managed accounts.On the one hand, the normal managed accounts are the most popular. Registered and regulated forex brokers offer such accounts, particularly to get more clients. The brokers assemble the best forex traders to operate the accounts.
Additionally, the brokers register the accounts in your name. It means you have exclusive access to the funds in the account. Further, a management agreement sets out the terms of the relationship for the avoidance of conflict in the future.
On the contrary, pooled accounts do not give you any control over your funds. Usually, experienced forex traders open a single account, and then they solicit money from interested investors. Therefore, the professional trader has exclusive access to the funds as well as everything concerning trades. Unfortunately, pooled accounts are the target of scammers because of their loose structure.
Invest with a registered and reputable management company
Since the advent of online forex trading, many companies sprung up. The problem is that many of these companies are Trojans set up to swindle money from the public. Fortunately, traders have systems through which they can establish the legitimacy of a money management company. Firstly, the company must have a registered address. It proves the physical existence of the company. Secondly, the company must show evidence of regulation by a reputable regulatory authority. The significance of this is to avoid the case where a company disappears with your money without a trace.
To determine the reputability of the company, do an online search for reviews. Luckily, numerous online communities have useful feedback on money management companies. Such information will help you to determine if the company has a history of making losses.
Do not go all-in with a new money manager
Professional money managers have access to the best forex indicators to facilitate profitable trading. Also, they use forex charting tools to refine their strategies. However, this does not preclude loss-making.
Money managers are proud of their work, and they will stop at nothing to boast about it. Notably, they will always dwell on the positives and, much to their convenience, blackout the negative performances. For your safety, take some time to learn a new money manager before trusting with vast sums of money. It is advisable to start with small investments, then increase the funds gradually.
The sole objective of entering the forex market is to earn income from your capital. To be sure, managed forex accounts can help you to achieve the goal, but only if you learn how to avoid scammers. First, ensure that you understand everything about managed forex accounts before signing up. Secondly, ensure that your preferred money management company has a legitimate physical address. Lastly, invest your money gradually until you have full confidence in the money manager.