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.

E-currency Trading - An Alternative to Futures & Forex Trading

I find it amazing that nearly everyday I receive something online or offline that is the greatest break-through in Trading. You know the stuff. This system or that method has been thoroughly tested and back-tested in every conceivable fashion and is wildly successful. Some work for a period of time but most do not. The decades old statistical fact still remains, 90+% of Futures Traders will lose all of their trading capital within their first year of trading. Now there is a new and promising alternative.

Enter e-Currency Trading. In simple terms e-currency is Internet Money. E-Currency allows the purchase of Internet goods and services at lightning speed and most importantly with a high level of security. Much higher than credit cards, bank transfer etc. The demand for e-currency should only grow as Internet Commerce grows.

So what does this have to do with trading? There are literally hundreds of different e-currencies. Each is backed by an underlying Currency or a precious metal. The need arises to exchange between these e-currencies or convert an e-currency to hard cash. Much like the Euro is to the European Union. We can profit from the exchanging process and profit from the fluctuation of the underlying currency value.

The same basic strategies apply to e-currency trading as with futures trading. Supply and demand dictates price primarily. You could buy e-currency that has historically performed well (buying the trend) or go the opposite way and buy those that are under-performing, looking for a turn-around. You can even chart them if you like.

Leverage, that double-edged sword that Futures Traders are so familiar with is also present in e-Currency Trading. You can borrow against your portfolio to buy more e-currency. The compounding affect is almost outrageous. Some would argue that you never have to pay back the leverage. I contend that it is paid back if you closed your e-Currency account, because your final balance would be less the amount leveraged. The point here is the leverage in futures trading is often times the demise of a well intended trader versus the leverage afforded an e-currency trader combined with the daily compounding affect creates portfolio growth at a phenomenal rate. It is not uncommon to see portfolio growth of 20 40% per month.

Futures Trading and e-Currency Trading have a common downside. The learning curve is huge and can be frustrating and costly. Each has unique terminology, which is impossible to work around until you have a good understanding of the meaning. Thankfully in this world of information, we are able to find resources online and offline that shorten that curve. How much it is shortened is dependent on how much time you want to dedicate.

Industry experts have debated for years the optimum amount one should fund their futures trading account with. The obvious moving target is enough capital to withstand the drawdown periods. Many factors go into this but Ive seen numbers range anywhere from $10,000 to $50,000 and up. If this is the case then there is little doubt why most futures traders lose as most are willing to fund only the amount required to cover Margin or the Brokers account minimum usually a few thousand dollars. One of the biggest reasons for small business failure is being under capitalized, the same holds true in futures trading.

E-Currency Trading is different in that the experts recommend starting with a few hundred dollars and let the system build your account. Whatever route you choose, only trade with risk capital.

E-Currency Trading certainly has advantages over traditional futures trading and may well be worth your serious consideration.

Merv Thompson is the owner of a website that provides trading tools, resourses and reviews for todays futures trader.

Merv has started his own personal e-currency trading account and will periodically post updates - Visit the website to view the results

Additional information about e-currency trading can be found on his website at