Investing in a managed forex account has become a popular trading solution for many individuals who are unable to earn profits with self-trading. These individuals can either be beginners or novice traders trying to enhance their profit potential with managed account services or just people who prefer to profit from trading in a passive manner instead of playing an active role in the trading process. Becoming an investor in a forex-managed account does not require much knowledge or skills, but you should gather some surface-level knowledge to make more profits in your forex-managed account.
In this article, you will get some powerful tips to follow for making the most out of your investments in a managed forex account.
How to Start Your Investment Journey With a Managed Forex Account?
Before we get into the tips for making enough profits in a forex-managed account as an investor, we need to ensure that you start your journey in the best possible manner. Setting up an account for availing managed account services is a simple and quick process, but you still need to pay attention to some key aspects like choosing the best platform or broker for account opening. The most common types of managed forex accounts offered by brokers are MAM/PAMM accounts. The MAM/PAMM accounts have become an attractive option for many investors to avail of professional trading services.
Some brokers offer both MAM and PAMM accounts, allowing the investors to choose the one they prefer. However, the majority of brokers offer just one type of managed forex account. MAM and PAM accounts share many similarities, and they are based on the same concept that an experienced professional trader manages the trading activities of multiple investor accounts through their master account. The professional trader gets to trade with the pooled funds and is compensated for their account management service either by a share in profits or a predetermined service fee based on their performance. It can also be a combination of both based on the compensation model set by the broker.
Investors get to benefit from the expertise, experience, and advanced strategies of professional traders/account managers at an affordable price. You just need to look for a trusted broker offering managed account services through a MAM/PAMM account and sign up with them. The registration process is just as simple as opening a regular trading account. Still, the key difference you experience in a managed forex account is that you can’t enter or exit trades by yourself. You will have to choose an account manager from the top traders list and then allocate your funds for trading.
The account manager or trader will be placing trades in their master account, but as an investor, you can see how your capital is being utilized for the trades on your own account. The account manager will only be trading with your funds, and they don’t have any right to withdraw the funds or profits earned from your account. The broker will be in charge of managing everything else, and you can ensure the safety of your funds in all situations by signing up with a regulated and reliable broker for managed account services.
You have to check the trading conditions brokers provide and the platform functionality. Managed forex accounts also need solid trading conditions for a smooth trading process, and the linking of investor accounts to the master trader account is done using advanced technology. Hence, choosing a sophisticated and technologically driven platform is essential for a seamless trading experience. As an investor, you will get hands-off trading experience, but the professional trader will need superior technology to manage multiple accounts easily.
Tips to Maximize Your Profit Potential in a Managed Forex Account
- Consider Your Risk Tolerance While Choosing an Account Manager
The first tip for maximizing your profit potential in a managed forex account is choosing an account manager based on your own risk appetite. The account manager is a professional trader, and they will surely have their own way of managing the risk. But you need to ensure that they will manage your funds in a way that does not put your funds at a higher risk than your actual risk tolerance.
Many investors tend to focus solely on the profitability of a trading system or the past returns generated by an account manager. These metrics are important for making a sound decision, but you should also look at their risk profile before allocating funds to their account.
But for this, you need to make sure that you choose a transparent platform, as only then will you get all the information that you would need to find the ideal account manager based on your risk profile. In the case of PAMM accounts, you can only limit your risk with percent allocation. In contrast, MAM accounts provide greater flexibility by allowing you to set risk parameters for the usage of funds in trading.
- Diversify Your Investment With Multiple Managers
Another effective tip for maximizing your profit potential with a managed forex account is allocating your funds to multiple managers for diversification. Diversification should always be a part of your investment plan, as putting all your eggs in one basket is not the best idea in the volatile forex market. Even the best trader or account manager can encounter losses occasionally, which will impact your profits. To diversify your portfolio, you can indulge in trading side by side, but make sure to use the margin you are comfortable risking. For this, you can use a margin calculator that gives a good idea about the margin you should use in a trade.
You should look for account managers who follow distinct strategies from one another and try allocating your funds with them. This way, you can benefit from different strategies while reducing your risk of loss to a minimum level. While choosing multiple account managers, you can consider their profitability and risk levels to decide the percentage of funds that should be allocated to each manager. If you are able to build a solid investment portfolio, you can surely accelerate your profits in the managed forex account.
- Set a Longer Investment Timeframe
Many investors only want to test the waters by keeping a shorter time frame. This is a good approach when you are a first-time investor, as you are unsure about the profitability. But once you get confident in the strategy of a trader or account manager, you need to let them manage your trading activities for a longer duration by setting a longer investment timeframe. Doing so will enable you to earn more profits over time.
In addition to this, You may also consider investing your funds in long-term strategies, as that way you can gain more from long-term trends that take place in the currency market. Sometimes, investors are only interested in earning small profits within a short span of time, but setting longer investment time frames has proven to be an effective method for making more profits using managed account services.
- Performance Review and Allocation Adjustments
The last but most important tip that each and every forex MAM/PAMM account investor needs to follow is reviewing their account performance and making appropriate adjustments in allocation as and when needed. Most of those who invest in managed forex accounts want to earn some passive income without spending a lot of time and effort.
Still, you can’t follow the ‘invest and forget’ strategy in forex-managed account investing because you are not investing in an asset here. You are simply entrusting the responsibility of managing trading activities to a profitable trader. However, this does not guarantee profits, and the performance of the account manager can also deviate or decline in unfavorable market situations.
Hence, you must spare some time to evaluate the performance of your account, and then you can make some adjustments to make it better. As we said before, you can’t control the trading process but can surely take measures to optimize your investment portfolio. You can choose to withdraw all your funds from an account manager if you are not getting the expected results from them.
In case you are satisfied with the account performance, consider adding more funds and diversifying a bit more to make the most out of your investment. In short, periodic reviews are essential to ensure and evaluate your success as an investor.
Final Thoughts
So, these were some simple yet powerful tips that should be followed while investing in managed forex accounts. Generally, investing in MAM/PAMM accounts is seen as an easy way to get market exposure and make some profits while skipping all the complex processes involved in self-trading. But you still need to put in some time and effort to do a bit of research and make sound investment decisions. Investing in managed accounts does not require in-depth knowledge or skills, which is why anyone with some basic knowledge can make a profit.
