Forex Managed Accounts – The Ups and Downs

Foreign exchange (forex) is a highly liquid, fluid market. The daily trading volume extends well into the billions of dollars. It is also an extremely risky market and completely inappropriate for most (non-wealthy) investors.  And even for experienced forex traders, trading on one’s own can be difficult. This is due to the extreme volatility and transience of market conditions. Forex managed accounts provide a service to traders. They allow wealthy veteran traders to relax when making trades because a lot of the heavy lifting is handled for them.

Forex Managed Accounts

There are two types of forex managed accounts: automatic and personal. Automatic forex trading accounts are managed by computer. These managed accounts send you alerts when the market shifts or changes; provide indicators towards a potentially beneficial parameter change; and in some cases makes trades for you based on preferences you have chosen. With few exceptions, I believe automated trading systems are scams.  Personal accounts are managed by a live person, usually on behalf of a brokerage or financial services firm. Forex account managers are primarily authorized to make trades on your behalf based on their expertise.

Both types of accounts have advantages and disadvantages. Day traders and long position traders can benefit from either personal or automatic accounts. Personal account benefits come from being associated with a live person. Unlike a computer, a forex account manager can spot trends, give advice on parameters and draw on often years of expertise to help you make trades. On the other hand, unscrupulous or fraudulent managers can rob traders of thousands or hundreds of thousands of dollars. The burden is on the trader to choose the right manager.

Obviously automatic accounts do not have the flaw of being unscrupulous. Most automatic accounts are subscription services. Prices for these services can seem fairly reasonable; others can cost hundreds of thousands of dollars. There are also start-up costs to consider, in addition to subscription and transaction fees. Many programs offer training and guidance for beginning traders. Additional benefits come in the form of customer service and providing detailed information such as charts, tables, graphs and diagrams to help traders understand their profile. The downside of automatic accounts is common to all computer programs: glitches, bugs and vulnerability to hacking and infections. These can instantly cost unwary traders their entire portfolio, if not more.

Forex managed accounts have pros and cons, like anything else in the financial world. Traders need to exercise restraint and caution when choosing managed accounts, whether automatic or personal. Research all options carefully before making a decision – the rule of caveat emptor always applies when it comes to forex trading.