With the growth of the e-forex industry more traders will want to have accounts. According to the former head of foreign exchange trading in the Asian region of a major financial institution who has managed billions of dollars in the forex market the main problem is track record.
Always make sure you get an advisor with at least a three year audited track record or a verified profit and loss statement from a major bank. E-forex brokers are generous enough to provide a leverage of 100 to 1.
Fees for managed e-forex accounts are similar to other managed accounts. The standard payment of 2% of the account balance per year for the management fee, a 20% incentive fee on new equity highs and a small transaction fee is also paid. Some questions are listed below that you can as a prospective money manager on how he will handle your e-forex account.
First, ask what percentages of trades occur during the day session. Opportunities are available each time the Asian session opens at 7 PM EST, Europe at 2 AM and the United States at 9:30 AM. There are also advantages when it comes to not trading at all.
See to it that you are able to inquire about what percentage of the trades went down by more than 50% before recovering to break even or profits. What happens when you use money managers with low drawdown is that you also have lower expected returns.
It is useful that you find out what intermarket indicators the money manager studies. If you find out that the manager does not look at the dollar index, the major stocks exchange markets, gold and oil then ask why.
It will help if you knew what the manager’s worst trade has been. The defensive skills of your money manager should be great.
Inquire about how much of the profits the manager reinvests as well. One thing you also want to look into is the reinvestment by the manager of your profits to other accounts. Risk is lessened when this happens as the principal is already received.
What his strategy is for worst case scenarios is the next thing you want to ask. Most of the time, you will run into an account that is not moving at all. This might be a good time to consider rotating to new currency pairs.
One essential thing to note as well is what returns can you expect. If you get an answer to this question, reconsider retaining the manager. It is best to be cautions when he says he can accomplish the latter.