Safety and Costs of Managed Forex Accounts
Foreign exchange markets are commonly used by sophisticated traders, who take advantage of an ability to handle large amounts of borrowed money to amplify their gains. They have more liquidity and trade at a much faster pace than do stock and bond markets—in fact, forex is the most active market in the world. And the fact that transaction costs on it are lower makes it a popular forum for those who enjoy the thrill of speculation.
At the same time, forex markets can be dangerous for the inexperienced trader who may not have a sophisticated understanding of the effects of high leverage on their returns, and who do not have a good perception of how different news events like economic releases or central bank monetary policy decisions affect currency prices.
Using a managed account, ordinary investors can take advantage of the expertise of an experienced and proven forex trader. The downside to this approach is that the best managers typically charge high-performance fees of between 20% and 30% of a trade’s earnings, or the account profits.