Without a doubt, the first thing to understand about Forex is that you do not simply give your hard-earned money to some supposed Forex Guru to trade (ala Bernie Madoff.) No, in Forex there is excellent transparency because the first step you take is to set up your own account in your own personal name or the name of a business entity you control. Accounts are set up by highly regulated Forex brokers. These brokers are registered and regulated by the National Future’s Association. The great thing about this transparency is that whether you have your money traded by a Money manager or trade your money yourself, either way, you know what’s happening with your money 24/7.
A key player in the transparency of Forex is the Forex Broker. The Forex Broker must comply with several requirements inorder to qualify to be a Forex Broker in the US. As such these brokers must be financially sound and solvent in order to be a broker. That is extremely limportant because if you trust your money at an unregistered Forex broker abroad then there is certainly less protection for your capital. Thus setting your account up at a top notch Forex broker that complies with the US regulations do provide some peace of mind. In addition to the security of your funds, the Forex broker generally provides access to your account online so you can track your account 24 hours a day in real time. Compare that to mutual funds, your 401k, and other investments that are much slower and definitely less transparent in being able to track and you realize that Forex provides some advantages that these other investments simply do not.
Money Manager vs. Trading yourself
There are pros and cons to both trading for yourself and utilizing a Money Manager. A fact that most people must come to terms with is if you can’t dedicate a lot of time weekly and daily to study the Forex market which can literally take years to adequately learn and understand then finding a trading program and money manager are a must. On the other hand, if you can put in the time then there are resources provided by Forex brokers at your disposal. At the bottom of this article, there is a link that provides free Forex training and education that will help you in terms of finding quality Forex programs through licensed, reputable Money managers and additional education for trading on your own.
Money Manager Requirements
The Money manager needs to of course have a track record and you really want to find a money manager that understands what you are trying to accomplish. Forex should be a tool in your portfolio chest, but as is the case of most investments you should never put all of your eggs in any one asset class basket, but certainly 10% to 15% of your portfolio is a reasonable percentage to be able to diversify your portfolio. Depending on the Forex program you look for, it is possible to earn substantially higher returns in many Forex programs when compared to typical mutual funds and so forth. You also want to pay attention to drawdowns, with any forex program or investment there are typically periods of consecutive losses so you want to pay special attention to those, typically the bigger the returns, the more sizeable the drawdowns or periods of loss may also be.