Managed Forex Accounts

[Kathy Garner]

Managed forex accounts can be a helpful tool for the new or
inexperienced investor, and for those investors who simply prefer
having their money handled by a professional. The forex (foreign
exchange) market is a highly specialized form of day trading that
deals in the world's currencies. Trading forex is speculative, with
potential for huge profits and great losses, so knowledge of the
market is essential for successful trading. Managed forex accounts can
offer an inroad to that knowledge.
Forex is a 24-hour market that is traded over the counter (OTC) via
the "interbank" with centers in New York, London, Tokyo and Sydney. It
is also a global market. Some forex investors have no desire to watch
the market 24 hours a day. Others either do not have the experience,
or simply do not have the time. Managed forex accounts provide
investors with an experienced forex "watchdog" to act on the
investor's behalf. Professional traders can not only keep an eye on
the ever-changing conditions, but also have access to a greater range
of trading situations. In addition, with a professional on the job,
the investor gains improved time and increased flexibility. The
professional can acquire information on the fly and take advantage of
opportunities as they arise.
For the traditional investor, managed forex accounts can provide
portfolio diversification. Real estate, equities, fixed income and
other traditional investments tend to be cyclical in nature. Trading
on the forex market gives the classical trader an opportunity to make
money regardless of the activity on the stock market. Traders with
managed forex accounts can utilize both long and short positions,
because in forex trading there is no difference in the profit
potential between the two positions. Considered "biased long", forex
is capable of profiting under any market condition.
Overseeing transactions is just one of several benefits managed forex
accounts provide. Minimum investment required with forex is lower than
the more traditional equity and real estate accounts. Additionally,
managed forex accounts deal only with the individual trade, (unlike
mutual funds where trades involve funds of several investors). As a
result, investors have access to the entire balance of their account.
There is no lock-up period, so the investor can withdraw any or all
funds at their discretion. In addition, professionals have access to
more markets, and can more easily manage the higher risk, more
volatile currencies.
Knowledge of the market is essential, but so is knowledge of who is
participating in the market. To begin forex trading, an investor must
have an account, a trading platform and a reputable broker. Before
making a commitment to trading forex, perform background research on
brokers, particularly regarding their country of operation. Because of
the lack of a central exchange, managed forex accounts brokers are
governed by the regulations of their individual country. In the United
States, brokers must register with the Futures Commission Merchant
(FCM). The Commodity Futures Trading Commission (CFTC) regulates them.
Subsequently, each broker has an NFA (National Futures Association)
ID, and the Brokers can be checked out with regulatory authorities.

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