The intricate ways of the financial markets often confuse the beginning traders. The rate of casualty tends to be high since success demands specialized knowledge, experience, and emotional control. You can easily become impatient, look for shortcuts, and then allow your emotions to take over.
Fake Investment Funds
A few years ago, high yield investment programs (HYIP) appeared online and promised investors steady returns on their money. Most of these companies are scammers. They just pay you from the investment capital of future applicants and when investors stop registering with them, the scammers simply shut down and leave the new investors with no profit. Beware of these type of private investments. Deal only with registered, government regulated companies that have excellent reviews.
Many are intrigued by the tales of the spectacular success in currency markets achieved by some smart traders who have made the needed investments and reaped the benefits. As a result of the intricate problems concerning traditional trading, the brokerage business designed some practical alternatives that allow you to delegate trading control to another party. To use these options, you may still be faced with the need for experience and emotional obstacles, and for these reasons, you may find the managed forex account a very tempting offer.
A managed forex account gives consent to a professional manager to trade your funds for you in exchange for a fixed share of the profits or a salary. You may opt for a specialized firm for this purpose or a broker. The latter service does offer an additional level of risk protection. You must always be wary of selecting a money manager that you can trust. While most money managers are legit, there have been numerous notable scams in the past.
Advantages Of Managed Accounts With A Broker
There are some advantages that a managed account offers to the trader.
- Experience is the only asset that can lessen the large risks associated with currency trading. Since a novice lacks that kind of a background, cooperating with a money manager may seem to be a good choice.
- Not everyone can tolerate the emotional difficulties involved in trading because each person has a different character profile and some are more prone to emotional extremes than others.
- Lack of adequate time is another issue that puts off beginning traders from totally committing to currency trading. A full-time account manager who can dedicate all his energies to trading for his clients is another positive aspect of this approach.
- Last of all, several online traders show their past records to give guidance on potential future returns. This data may also help the beginner in deciding the best offer for himself.
Inherent Dangers In These Advantages
All of the above sound appealing, but there are many inherent dangers that are hidden in it.
By allowing the manager to trade on your behalf, you lose the opportunity of learning in the markets by practice and study.
By surrendering the emotional tasks associated with trading to the manager, the account owner puts himself in continuous slavery to the will and skill of the manager.
As a final point, while the past records of money managers can be a useful guide on their skills and prowess, it can also be misleading. There are no guarantees of a similar performance in the future even with a past record of positive returns.
Recommendations On Managed Accounts
It is usually a better idea to be in charge of your account, and trading to gain knowledge, than handing over your account to an outsider to control. It’s difficult to envisage how reliable a person is on the basis of the short communication preceding the signing of a contract.
We are not saying that all managers are fraudsters, but it is necessary that you perform the basic background check. Ask for the required licenses and certifications before picking whom you will hand over the management of your wealth.