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Managed Forex Accounts Due Diligence
Conducting Good Due Diligence
The reason that people invest in alternative investments such as managed forex accounts is to make money, but what is more important than making money is protecting your investment as thoroughly as possible. Conducting due diligence and considerable investigations are vital if you want to keep risk down to a minimum. Don’t be afraid to ask as many questions as you think necessary, after all, it is your hard earned money and you want to find the best managers to trade it that you can.
I have listed below what to look out for and ask potential fx account managers
Trader Track Record
You should evaluate the past performance of the trader. Ask for historic records and results for at least 2 years, the longer the time the better. Trading account statements are good verification as are online analytical tools such as www.myfxbook.com and ta.fxcorporate.com that show account history. Another thing that you could do is ask the trader if they have any testimonials or references from anyone who is using their services.
Although past results may be good, they aren’t a guarantee that future results will be good too. They are simply an indication that the trader may perform well in the future and that they are proficient at trading.
3rd Party Audits
Another way of verifying that the trading company are consistent and reliable is they can present you with 3rd party audits from a regulated audit company. You can go further and check that the auditors themselves are actually regulated by checking online. Also you can send them an email or phone them for proof that they did in fact complete the audit.
Are They Regulated?
There a many managed forex traders and brokerages out there, some are regulated and some are not. They don’t have to be and they can trade unregulated. However, traders and brokers that choose to be regulated want to add a level of validity and legality to their business reputation by adhering to best international regulated practices that endorse that the sector is of good repute. Not all unregulated traders and brokers are unscrupulous, nevertheless, you stand a far lower risk of losing your investment if you choose a regulated trader or brokerage. It is just common sense.
If you check out a managed forex company’s website that you are thinking about investing in, you should find them offering financial information such as where they are regulated, performance charts and answers to many questions. If you contact the trader, they should offer you access to audits, historical records, who the trading bank are and all other information that you require. If you find the trader trying to evade your questions or they seem unclear in their reply, it could be that they are hiding something and it maybe better to look elsewhere.
Ask the trader if they have a maximum drawdown limit. The drawdown limit is the percentage that an account drops from its highest amount. If the drawdown limit is fixed at 40%, and the account falls 40%, then the account will stop trading to stop you losing any more money. If there is no drawdown limit then your whole investment could be lost. Some traders have a limit set on individual trades so that if the trade drops 2% for instance, the trade will stop.