In today’s world, the forex market has exploded on to the scene, carrying with it an infinite potential for growth. Capturing the attention of television and internet users worldwide, it seems as if the word’s spreading faster than ever. Despite this growing interest, there is NOTHING on the Internet explaining the process of opening a managed forex account. Just like everything else we do, we figured we’d play the role of forex pioneer by discussing this FX top in great DETAIL.
In this article we will tell you how to find a managed forex trader while providing tips on how to complete the process of investing. In addition, we will outline steps on how to open a managed forex account and succeed for years to come. First things first, let’s cover the steps to opening a FX account. Scroll down and take a look!
Steps for Investing in Managed Forex (FX)
1. Define your FX Risk and Reward: Before investing with a forex trader, always define your MAX risk upfront. If you understand what you are willing to lose, you can view the track records of different FX traders and pick what meets your risk tolerance. Also, you MUST define your goals when you are seeking a forex investment. If you are looking for high yields, then be prepared to risk more as well. If you are looking for lower yields, try to find a FX trader with a history of 3+ years. Either way, remember, unless you align your investment with your personality and goals, you will ALWAYS end up disappointed.
2. Make a Plan to Search for FX Traders: Once you have defined the goals and risk for your FX investment, create a plan to start searching for traders. Though you can find a number of forex websites on the Internet, you will only find the best traders if you network aggressively in the forex industry. This won’t happen from you hiding behind a computer screen. Don’t be shy, grab the phone and start searching for the “golden egg”. Remember, Googling can do wonders, but the best forex traders do NOT advertise on the top of the search engines. The truth is, those who settle for the first managed forex investment they find are usually the ones who end up disappointed in the end.
3. Find a Few FX Traders if Possible: During your searches on the Internet, you may become frustrated, but here are a few tips. By searching the web for forex discussion forums, managed forex companies, FX brokers, forex clearinghouses, financial directories, and blogs such as this, you will ALWAYS uncover a few good managed FX investments. The key is creating a solid search plan, as we mentioned in the prior step. By doing so, you can aggressively search for managed forex investments with tunnel vision, devoting your time ONLY to opportunities which align with your forex risks and goals.
4. View the Contracts for Each FX Trader: Though most contracts for FX traders are similar, it is always good to analyze the forex contract in detail. First, take a look and see who the FX contract is with. In many cases, you will have a contract with the FX broker, and the trader will ONLY have limited power of attorney to trade the account. In this case, research the FX broker and make sure they are legit. In addition, make sure the forex trader has a contract with you guaranteeing a specific MAX draw down % for your account. This will help protect you from losses, or legally recoup losses if the forex trader breaks the contract. On the other hand, if you have a contract with a FX fund or trading company, make sure you feel comfortable with the contract sections covering liability and draw downs. If you are ok with the verbiage, it is time to complete due diligence on the forex traders.
5. Research and Due Diligence on FX Traders: To research a managed forex trader, you need to follow a few basic steps. First, you MUST speak with the forex trader and someone who can attest to their success. By having a trusted reference and a sense of confidence in the FX trader, you can feel comfortable enough to spend time digging deeper. Second, you should ask the forex trader for a track record showing the history of the performance. When you ask them for the track record, also ask them if there is any third party who can verify the yields are accurate. If the yields are audited or you have a credible client reference, you can once again dig deeper. Lastly, after you have completed the first two steps of due diligence, perform a criminal background check. If that comes up clean, “Google” every keyword related to their name, company, and geography and see what you find. Once you have completed these basic steps, you should have a far better chance of finding a FX investment that meets your goals.
6. Choose the Best Managed FX Trader for You: After you have completed due diligence on the few forex traders that are still appealing, it is time to make the decision. Though we know the human instinct is to go with the highest yields, remember, no investment is worth losing sleep over. If you consider yourself to be a smart investor, and NOT a gambler, you will choose trader that matches your risk profile. In short, if you are someone who wants returns that beat the equity markets, look for a FX trader earning less than 50% who can provide a stable track record of 3+ years. If you are looking for higher yields, and have capital to risk, search for FX traders making 100%+ per year. Remember, if you can find a trader with yields exceeding 100%, they will usually also have a few big losses on their track record. By assessing these losses, and confirming the yields are REAL, you can make the right choice when it comes time.
7. Complete Forex Contract and Other Documents: Once you have chosen the forex trader you are investing with, it is time to do your part. In most cases, the process of completing FX account opening documents is rather easy. Typically, you will have to fill out a forex contract which includes risk disclosures, duties of both parties, and other legal verbiage. In addition to the contract, you will also have to provide identification such as a passport or ID. For some managed forex accounts, you may even have to get a passport notarization and send that in with the rest of the documents. After you get all of these documents completed, all you need is to do is sign the LPOA (Limited Power of Attorney Agreement) and you are ready to roll.
8. Receive FX Account Number and Wiring Instructions: Once the FX broker or clearing house has received the account opening documents and proper identification, they will generate an account number. This account number is associated with the investors name and information, and is also tied to their segregated forex account. As soon as the number is generated, it is sent to the forex investor with wiring instructions on how to fund their new FX account. Typically, this is a segregated account in ONLY the name of the investor, and in most cases, the investor sends the wire with “further credit” to themselves. This ensures the funds are transferred from one account of the forex investor to another account they control, never putting the funds at risk for fraud.
9. Wire Funds into New FX Investment Account: After the forex investor has received the wiring instructions, it is time to step it up and send the money. In a lot of instances, new managed forex investors get skittish right before they are going to fund the account. The fact is, if you’ve completed steps 1-8 properly, you will have NO reason to be anything but excited. Remember, all investments have risk, and your job as a forex investor is to trust your intelligence and NEVER blind yourself by looking ahead. If you have made the choice to invest with a trader, and have completed the contract, SEND the MONEY! If you don’t, you may burn your bridge to wealth due to baseless paranoia.
10. FX Trading Starts the Next Best Market Day: At this stage, it is time to sit back and relax before you start to analyze the forex account and trader. Usually, domestic wires are immediate, and international wires take 3-5 days. Once the wire has hit your forex account, you will be notified with a statement from the FX broker or clearing house. This statement will show your opening balance, and will serve as a receipt for your initial managed forex investment. At the same time you are notified, the trader is notified and the funds are transferred “onto their books”. As soon as the funds “hit the books” of the managed forex trader, they will start trading as soon as the market indicates it is good opportunity.
Though it may seem like quite a process to open a forexaccount, it really is rather simple and can usually be accomplished in 2-3 days. Think about it, within 72 hours you can be profiting in managed forex on money that’s just sitting there, earning little to no interest. Sounds pretty intriguing to me, but forex trading can’t be that easy, right?
Once you have opened the managed forex account, you can get excited, but NEVER look too far ahead. The reason is, you always need to be COMPLETELY happy with your forex trader. Take a minute and ask yourself, are the forex yields satisfactory? Is the forex trader's communication good? Is everything transparent? How is the forex trader about withdrawing money? By answering these questions several times over the course of the first year, you will know if you have found the “golden egg”, or just ANOTHER forex oasis.
In summary, it’s ALWAYS important to implement these steps during every stage of the forex process. Whether you’re starting to look for a FX trader or you’ve already invested with a trader, you MUST always stay sharp. Investing in managed FX is not a decision you make “off the cuff”, successful investors understand the steps AND the purpose behind them. Hopefully this article has taught you HOW to be diligent in forex investments, because if It hasn’t, the only thing that can is losing the cash yourself.
Related Terms: Alternative Investment, Managed Forex, Offshore Forex, Private Placement, Forex Education, Lease Bank Instrument, Managed Futures, Managed FX, Private Investment Blog.
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