Managed Forex Accounts

Since we started this section of the website, more than 5 years ago, the managed forex accounts industry has changed beyond recognition. Back then, there were hundreds of different managed forex companies, all with a website, making claims that their unique managed forex account would make their investors 100%, 200% per year, with no risk at all.

In the vast majority of cases, all these claims proved false – just empty statements on a website, not backed up by real live account statements, audited accounts, or verified by any independent third party. And as a result, investors invariably lost most, if not all of their money.

Managed Forex Accounts in 2008

In our original overview of managed forex accounts, here was our original advice – aimed at trying to help those investors who were keen to access  the potentially lucrative world of managed forex:

Managed forex accounts have increased in popularity over the past few years, and especially since the recent turmoil in the financial markets. Investors in traditional asset classes such as equities, and real estate, have seen the value of their investments fall dramatically, and have actively sought alternative forms of investment.

Investing in a managed forex account can be an ideal way to add diversification to a traditional investment portfolio, and to increase overall returns. Studies into professionally managed forex accounts or a managed forex fund have shown that returns are not related to the stock market.

Managed forex accounts can give an investor who cannot watch the forex market 24 hours a day an opportunity to participate in the $4 trillion day forex market.  Managed forex funds are also an effective way for retail investors or forex traders alike to benefit from the knowledge and expertise of an experienced forex money manager without the often onerous restrictions and entrance charges of a hedge fund.

Generally speaking, managed forex accounts offer investors the following benefits over traditional investments in the equity markets and mutual funds:

• Absolute returns in either a rising or declining equity market
• Diversification from a traditional equity/bond portfolio
• Disciplined, risk controlled trading of liquid assets
• Daily reporting, usually online, of account positions
• 24/7 access to account balance
• Immediate access to funds

One of the biggest advantages of investing in a managed forex account is that your funds are not controlled by the forex money manager, but are held by the forex broker that you open your managed forex account with. The forex money manager only has the ability to trade your account; he has no control over your account, and cannot withdraw any funds from your account.

However, before committing real money to a manager, investors should take care to carry out as much research as possible into the managed forex provider, and ask the following questions:

• Are they regulated, and if so, by whom?
• Is the broker they use regulated, and if so, by whom?
• How many years experience do they have of trading forex?
• What is the maximum draw down of the manager?
• Can the provider supply audited statements of the performance claims?

As you can see, this advice back in 2008 seemed sensible, and we received many messages of thanks from investors who had followed this advice, and avoided opening managed forex accounts with some rather dubious providers. However, there was still a complete lack of transparency in the managed forex account marketplace, with very few truly independent and reputable managed forex review providers.

Increasing Transparency - Our Attempts to Find Reputable, Managed Forex Accounts

In an attempt to weed out the scammers and fraudsters from the genuine forex money managers, Forex Village contacted a number of managed forex account providers, and requested that they let us open a demo account with them (or open live trading accounts with a nominal amount, of just $1,000), in order to be able to verify the performance that they were advertising on their websites, and to provide an unbiased, objective review for our readers.

Unsurprisingly, the vast majority declined to let us open a demo account, or gave an excuse as to why they couldn’t open a live account (eg the account balance is too small etc).   We also had a large number of requests from so called forex money managers to 'review' their company - but when we asked for verifiable statements,  we invariably never heard from them again.

There were some notable exceptions, however, even reputable managed forex funds became unstuck as a result of regulatory rule changes, both in the US (prohibiting US clients) and in Europe (which required all forex money managers to be regulated).  As a result, most of the reputable forex money managers had to stop trading for their own clients. Which obviously raises further questions for managed forex providers who are still operating, as most of them are now operating illegally.

Transparency for Investors – Managed Forex Account Verification in 2013

The past 2 years has seen a huge shake up in the managed forex industry.  Whereas before scammers could hide behind false promises on a website, today there is complete transparency in the managed forex market, as a result of mirror trading.  Whilst previously we recommended that all investors request to see live trading statements, it was still all too easy to manipulate the data – either by sending across a pdf which had been ‘photoshopped’, or sending across statements from a demo account – these tactics are today a thing of the past.

Today, all reputable managed forex providers can easily link up their managed forex trading account to one of the popular mirror trading platforms – such as Zulutrade, Currensee, Mirror Trader, or trade through a broker-owned copy trading platform such as eToro’s Copytrader – and the investor can see exactly what trades the manager is taking, the account’s performance, the levels of drawdown etc.  This makes it all but impossible to scam unsuspecting investors.

And if a managed forex manager refuses to link up his trading account to a mirror trading platform? Well it’s easy to draw the conclusion that the manager is trying to hide something, and to stay well away.

Mirror Trading - Managed Forex Accounts Version 2.0

We now strongly recommend all investors who are interested in managed forex accounts to invest in the forex market through a mirror trading platform. There are several advantages that mirror trading platforms offer to an investor over a single managed forex manager.

• An investor can diversify his risk by copying the trades of more than one signal provider. This is a key advantage, as every trader goes through difficult trading periods, and by having a portfolio of traders will smooth out any draw down over a period of time.
• Sophisticated statistical tools available to analyze a trader's performance and trade history. Not only do mirror trading platforms simply provide verified trading statements, but also tools to analyze the trading of the managed forex provider, such as maximum draw down, whether the trader adds to losing trades,  how much money he is managing, how long he has been providing trading signals etc.
• Advanced risk management tools - all mirror trading platforms offer sophisticated risk management tools to enable investors to control the risk taken on signal providers - by limiting total draw down, to limiting the risk that the trader takes on individual trades - so even though the investor is not taking the trades, he can control the levels of risk which he is exposed to in relation to the signal provider.

So Which Mirror Trading Platform Do We Recommend?

There is no definitive answer to this question, as each mirror trading platform has it's own unique features, and each investor will have a different risk profile, and different investment goals. Because there are now so many signal providers whose performance you can rely on, an investor is truly spoiled for choice.

As a starting point, we would recommend all investors to open a demo account with Zulutrade.  Zulutrade has over 10,000 signal providers to choose from, many of whom are very successful traders, and manage significant sums of money for the investors who follow their signals.  This will give all forex investors a flavour of the potential that mirror trading has to offer, and will give you an idea of the types of strategy that might appeal to you. In addition, there are over 50 brokers to choose from, should you decide to open a live trading account.