The amount of profits that you can earn as a forex trader totally depends on your knowledge and skill level. But when you are a beginner, you neither have the expertise nor the experience to find the ideal trading opportunities. Thus, you will have to invest some time and effort to learn about the trading concepts and also build a strategy to follow for navigating the volatile currency market with ease. One thing that many beginners don’t know about is that they can also earn from trading alongside learning. This is done by investing in managed forex accounts where your funds will be managed by a top trader who already has a profitable trading system that you can count on.
Basically, it gives you a chance to earn by leveraging the skills of an expert and in this blog, we will have a look at managed forex accounts and how they benefit forex traders.
Why Should You Open a Managed Forex Account?
The managed forex accounts are not just for beginners who are in the phase of learning. It can also be utilised by those who can’t trade as they don’t have enough time or just lack interest. Trading in the live market by watching the charts for hours may not be everyone’s cup of tea. Some just want to invest and earn without having to monitor the market and price movements all day long. There are people who have enough knowledge and skills to trade themselves but still choose to invest in managed forex accounts either to diversify or to optimise the profit potential. This also saves you from the stress of self-trading.
There are two types of managed accounts that are popular among forex traders: PAMM and MAM accounts. PAMM account operates with a percentage allocation basis and thus it is the abbreviation for Percentage Allocation Management Module. This is a pooled money account managed by a professional trader and the profits/losses will be shared among the account manager and investors based on the proportion of capital invested for trading. The investors cannot place trades on their own and they don’t get much control over trading activities.
In the case of MAM accounts, it stands for Multi Account Manager and such account types give some more control to investors as you can set some conditions for managing the risk. You still cannot enter or exit trades on your own but this account type offers more flexibility as you get to set criteria for how your funds will be managed. Because of this, MAM accounts are more suitable for experienced investors, whereas PAMM accounts are perfect for those who don’t have enough expertise to manage the risk.
Benefits of Managed Forex Account
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Easy To Get Started
Unlike self-trading, investing in managed forex accounts does not require a lot of preparation and learning. You should do some research to be aware about the risks and rewards but getting started with a managed forex account is way easier in comparison. You don’t have to dive deep into the technicalities of trading and can step into the forex market without any hassle. The trading process is also simplified as you just need to find a reliable broker offering a MAM/PAMM account, and then look for skilled traders to invest with after evaluating their performance and strategy.
After you invest, you just need to monitor the account performance from time to time and make any adjustments in your investments based on the results. Meanwhile, you can also develop your trading skills by opening a demo account on a beginner friendly platform like MT4. This platform is suitable to keep things simple, whereas its successor, MT5 can be used for getting access to advanced tools and would be perfect for those who are looking for a superior trading experience.
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Higher Profit Potential
When you trade on your own using your own funds, the profit potential will be limited and it also depends on your skills and strategy. But when you invest in managed forex accounts, the expert trader is managing the funds of multiple investors and thus the potential profits are higher as the gains are shared on the basis of how much funds you have allocated to a trader or account manager. Because of this, even skilled traders are turning towards MAM/PAMM accounts as the earnings and success rate are higher when you choose the right trader.
You just need to make sure that the account manager you choose has a consistent win rate and that their risk appetite matches with your risk tolerance. Even though the earning potential is high, you need to consider the risk and manage it by diversifying your investment across different account managers. It is important that you are not too dependent on just one trader as even the best trader can have bad trading days and you need to make sure that you don’t lose a lot of money in the process.
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Accounts Work To Your Advantage
One major reason behind the growing popularity of managed forex accounts is that they work in a way that makes the trading process effortless and rewarding for an investor. They work to your advantage as you get the chance to make decent profits without direct involvement in trading activities. Even though the trading decisions will be made by another trader, you still get complete control over your funds when it comes to deposits and withdrawals. Once the profit is credited, you can take it any time and there is a lot of transparency when it comes to the profit sharing.
You just need to make sure that you pick a trusted broker for investing in managed forex accounts and they will be in charge of compensating the account manager for the services they offer. They will either be paid a commission or share in profits depending on the policy of the broker. Thus, you don’t have to pay anything directly and the account manager only uses your funds for trading purposes while trading on their main account as the investor accounts are connected with it.
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An Innovative Approach
Another benefit of managed forex accounts is that it allows you to enter the forex market with an innovative approach that removes the limitations of traditional trading. The trading process will be automated for an investor once you choose your account manager and you get to see the trades and real-time results on your PAMM/MAM account. You can also choose to remove an account manager if their performance does not live up to your expectations.
Earlier, the benefits of trading were only availed by those who are knowledgeable and possess the required skills. But because of this innovative solution, trading can be rewarding for anyone and that too with minimal risk. Thus, you don’t have to give up on trading due to lack of time or talent.
Bottom Line
So, these were some valuable insights about managed forex account investment and the benefits it offers to novice traders and investors. It is a feasible alternative for anyone who struggles to keep up with the volatile currency market.
