Thursday, October 4, 2007

Managed Forex Accounts

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 worlds 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 investors 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.

Thomas D. Houser The key to successful Forex trading is knowledge.