Trading forex can be complex and time-consuming for new investors, so it’s no surprise that managed accounts are viewed as a viable alternative. Rather than personally managing positions on a daily basis, investors can effectively outsource the work to a third party who completes trades on the account owner’s behalf. Let’s see here are managed forex accounts a good option for traders who don’t yet treat it as a full-time job.
At first glance, managed forex accounts appear to be the definitive solution for traders who are not quite ready to commit to forex full-time or need a helping hand getting started. However, while partnering with a money manager offers many benefits, you should also be aware of some of the downsides of managed accounts. With a fair and balanced overview, you can make the best decision for your financial objectives.
What do “money managers” do exactly?
When using a managed forex account, you are effectively hiring an experienced professional who will buy and sell currencies for you rather than completing trades yourself. While they conduct transactions, you do not have to cede control of your account to a third party. That means that only you will have the ability to make deposits and withdrawals. You can also check your account balance regularly and get a complete overview of trading activities.
This gives new and part-time traders the “best of both worlds” as they can rely on the expertise of a money manager to make trades while also retaining control over accounts. To hire one, you will need to research managed forex accounts and perhaps go with a comparison site’s advice and recommendations that work diligently to combat forex fraud.
It is important to note that managed accounts charge a premium for the service so expect higher costs and fees if you decide to go down this path. These accounts may also require higher deposits. If budget-friendly trading is crucial for you, a regular account may be the best option.
What are the benefits?
However, managed accounts could be perfect for you if you only want to trade forex on a part-time basis, cannot devote the necessary time to keep track of the market, and are willing to pay extra for what is essentially a “middleman” for each transaction. With money managers, you can focus your efforts on other areas of investment or your full-time job.
Another significant benefit is the physiological impact or burden that is alleviated when using a third party. Some traders do not have a natural disposition for trading as it can take a mental, physical and financial toll. If you are constantly worrying about the consequences when entering and exiting the market, it may be best to let a money manager take the reins.
Managed accounts are also similar to social trading and other tools that allow investors to copy the strategies of others. While you can offer suggestions and have a certain degree of control in directing strategy, experienced third parties are likely to have their own tactics that have delivered success.
What are the downsides and risks?
Using a manager allows you to tap into a wealth of experience immediately, but there is a downside in that you may not develop your trading skills as quickly. Making both profits and losses with your own money is arguably the best way to learn, both from a technical viewpoint and emotionally, as it teaches you how to deal with winning and losing streaks.
Handing over responsibilities to a third party also brings inherent risks as you will be reliant on them to make trades. That’s why it is imperative to research money managers thoroughly. The process of opening a managed account is also longer than for a regular trading account, as you need a legal document to authorize it.
Managed accounts are also built around long-term gains rather than quick profits. If you want to focus on the short term with a flurry of trades, it may be best to operate your account manually. The same is true for those that want complete control of their assets. Managed accounts only work when you are happy to cede a certain degree of autonomy to a third party.
An account managed correctly can deliver consistent profits at a return on investment that suits your financial objectives. Still, you need to weigh up the pros and cons carefully to make a final decision on its viability. If you don’t want to trade on your own, money managers could be right for you, but they bring additional fees, deposit requirements, and risks.