Due to the complexity of the financial market, such as the types of analysis, the vast choice of brokers, the different kinds of contradicting signals and data, the many voices that shout buy and sell all the time can be very intimidating and often confuse beginner traders. Forex trading can be difficult and risky most especially for beginners. Casualty rates tend to be high, since being successful requires special knowledge, experience and emotional control. This is why having a managed forex account might be an exceptionally alluring offer.
A managed forex account gives a professional manager the access to trade your funds on your behalf for a salary or a fixed share of the profit. You can select a specialized firm for this purpose or a broker that offers quality software feature that permits your account to be traded by an expert. In selecting a money manager, a trader must be careful, while most money managers are legitimate, there have been several notable scams.
ADVANTAGES OF MANAGED ACCOUNTS
There are a number of advantages accrued to using a managed account by the trader.
1. EXPERIENCE- This can only be gained through long-term involvement in the market. It reduces the large risks associated with currency trading. Since a beginner does not have such a background by definition, cooperating with a money manager may seem to be a good choice.
2. EMOTIONAL DIFFICULTIES- Forex trading requires emotional stability and this attribute is not possessed by everyone because each person has a different character profile and some are prone to emotional extremes than others. Therefore, working with a money manager can also help in overcoming the problem.
3. LACK OF SUFFICIENT TIME-This is another issue that discourages beginner traders from totally committing to currency trading. A full time account manager who has the ability to devote all his energies to trading for his clients is definitely another positive aspect of this approach.
DISADVANTAGES OF MANAGED ACCOUNTS
All of the above sounds appealing, but there are many inherent dangers that are disguised in that simple appeal.
1. LITTLE KNOWLEDGE- By allowing the manager to do all the work by trading on his/her behalf, the traders does not benefit or acquire any knowledge from the accumulated experience of that person. The trader also loses the opportunity of learning in the market by practice and study. In essence, fully dependent to the manager and thus depriving himself/ herself the independence of mind and the analytical mentality that is a necessity for a trading career.
2.BECOMES A PERPETUAL SLAVE- By handling all the emotional responsibilities of that is associated with trading to the manager, the account owner condemns himself/ herself to the will and skill of the manager, because it will be very difficult to withstand the emotional pressures associated with trading.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.