Best Forex Managed Accounts

What if you are really interested in investing in the forex markets yet feel daunted by the overwhelming amount of experience and knowledge required for trading successfully? Well, this is where managed forex accounts come into the picture, mimicking something quite similar to a hedge fund.

Managed forex trading accounts have been a major sector of the industry for some time now, along with copy trading. Clients with no experience speculating in the markets can replicate the performance of some of the smartest and talented minds with much better know-how; this is one of the main objectives of managed forex accounts.

While this avenue shows incredible lucrative potential, there is still a learning curve to overcome. Hence, we’ve created this in-depth guide covering all the important aspects of managed accounts and the best options for you to consider.

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Top 6 Best Forex Managed Accounts

Now that we’ve provided some helpful information on such services, let’s dive into the five best managed forex accounts (in no particular order of importance):

1. TechBerry
2. FP Markets
3. Pepperstone
4. AvaTrade
5. Dukascopy
6. FIBO Group

We’ve prepared this list to aid and fast-track your search for the most suitable forex managed account, considering the broker’s regulation, track records, credibility, services, and other important information.     

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What is a managed forex account?

A managed account in forex involves a designated ‘portfolio manager’ or experienced trader taking positions on behalf of an investor or group of investors for a performance commission. 

Most managed forex accounts are provided by brokers who vet the expert trader based on predetermined risk and performance-related metrics. Hence, the parties involved in a managed account include a broker, expert trader, and typically a pool of investors with various monetary contributions.

Importantly, positions taken by the expert trader are automatically copied onto the investor/s account/s without any manual intervention from the latter. Although the ‘master’ account combines all the deposits from clients, managers have no access to the funds.

Investors rely on bespoke technology to achieve the seamless and computerized copying of the positions, prevent fraud in the profit distribution, and funds tampering. Hence, forex managed accounts come in different forms based on the allocation module/profit distribution and management model, which will be covered next.

PAMM (percentage allocation management module)           

PAMM is the most popularly offered managed forex account. So, what is PAMM? A PAMM account distributes profits as a percentage relative to each investor’s contribution. 

For instance, if two investors have contributed $1000 each (totaling $2000) in the fund, they would receive 50% of the profits; if three joined, the allocation would reduce to 33%, and so on. As more people join the pool, the percentage allocation diminishes accordingly.

LAMM (lot allocation management module)

A LAMM account is the least popular option provided nowadays, though it is the predecessor to PAMM. LAMM works similarly to the latter in the autonomous copying of trades from a ‘master account’ and in the ability to allow multiple accounts to invest within that LAMM.

Yet, the main distinction is rather than profits being split based on a percentage allocation of the contributions, and investors receive gains on the multiples of lots traded. Here, you would choose the number of lots to allocate in the markets.

LAMM is used for clients with larger trading capital for liquidity reasons. Liquidity becomes an issue with substantial account sizes as brokers may not always be able to fill orders in the entirety of the traded lots. 

RAMM (risk asset management model)

The RAMM account is a recently introduced managed forex account incorporating elements of PAMM and copy trading. Introduced by NordFX in June 2018, RAMM allows clients to copy from several RAMM managers on one portal, similar to a copy trading service.

One of the main distinctions between PAMM and RAMM is the latter allows you more capital protection. With traditional PAMM, you often cannot determine a specified drawdown limit as it’s based on the manager’s performance. Yet, RAMM allows this feature automatically, hence the term ‘risk asset management.’

MAM (multi-asset manager)  

The previously mentioned managed accounts are all client-facing. MAM is used by the designated managers to manage the sub-accounts from their respective sources in one fund easily. Furthermore, these individuals can use different predetermined allocation methods to employ more complex leverage and risk distribution across these accounts.

Hence, the MAM is for the money managers chosen by the brokers and not for investors. Depending on the requirements, some brokerage may require the potential manager to have some form of license to manage other people’s money and some years of trading experience with a proven profitable track record.

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How to use forex managed accounts?     

There are two kinds of people using managed forex accounts; experienced and newbie traders. A trader who has some knowledge of the markets can benefit from such services as a diversification strategy. 

This group may already be profitable in their own trading methods and would look to divert some of those profits to an uncorrelated strategy from a more skilled trader. Newbie traders who have no or little experience with forex can also use managed forex trading accounts to save time learning about the markets from scratch.

Ultimately, you can consider managed forex accounts as a means to add another strategy to your existing one if you already know about forex or seek to profit from the skills of others without being embroiled in the technicalities of this financial market.

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Advantages and disadvantages of forex managed accounts

Let’s briefly look at the pros and cons of managed forex accounts:

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How much can you earn on a managed forex account? 

This question is naturally one of the most frequently asked, particularly for curious non-traders. Sadly, it has an unspecified answer as the possibilities are open-ended. Self-directed traders themselves cannot accurately determine how much profit they can make in a day, week, or month due to the uncertainty of forex.

Hence, it’s challenging to put a number on what you can earn on a managed account as it’s dependent on several factors. On one end, anything is possible in forex; 10%, 100%, 1000% gains are all theoretically possible. Yet, the important question is the risk taken, which separates the professional from the amateur.

Therefore, how much you can earn is purely performance-based and will vary widely according to the managers investors subscribe to.

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Are managed forex accounts safe? 

Scams of all sorts in currencies are quite prevalent, warranting the highest caution possible, especially for less-informed investors. Generally, the only managed forex accounts considered safe are those offered directly by established brokers.

One should certainly be wary of any so-called investment programs claiming to be introducing brokers. It’s common for these companies to claim they have partnerships with particular brokers. 

One of the issues with this premise is clients have the impression their deposited funds go directly to said brokers, but it’s likelier they are instead funneled to the actual company. 

Another tell-tale warning to ensure your safety is any programs with abnormally high minimum deposits, usually above $5000, and ‘guaranteed’ monthly returns. Generally, you’ll want to invest in managed account services directly from a strictly licensed broker; this method has far less risk.

The brokerage will be transparent in the different managers available and all the necessary performance metrics with this avenue. Best of all, clients have control over their funds and can decide when to withdraw at any time, barring any relevant penalties depending on the agreement.

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The risks of managed forex accounts 

There are essentially two risks to such services: falling victim to scams and the general risk of losing money. The first danger is the easiest to overcome as investors need to use only the most regulated brokers. 

Plenty of scams exist of so-called PAMM investment services without any recognized regulation from a known regulator. The second danger relates to trusting your money to someone else. 

Although investors will always view a trader’s performance beforehand, these results do not indicate what will happen in the future. How a manager generates trading ideas may not be transparent, and this dependence means investors cannot make their own informed choices.

These are points particularly pertinent for non-trading investors. Although you alleviate the hassles of making your own trading decisions, it’s still crucial to have an above-average understanding of the dynamics of forex, a crash course of sorts.

This baseline knowledge allows investors to pick the right manager based on their risk tolerance and expectations and avoid con artists.

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Performance statistics to understand about forex managed accounts 

All potential investors for managed accounts need to familiarise themselves with some crucial performance metrics to have the best chance of choosing the most profitable PAMM agent. We should first treat investing in managed accounts as a long-term endeavor.

Although many investors may naturally favor high short-term gains with large drawdowns, it’s better to play it safe, particularly if you’re new to the forex world. Below are some of the main statistics to access for any managed account and what they mean.

Account age

This refers to how long the managed account has been opened. Clients should only consider accounts older than one year for a more reliable track record, but the older, the better.

This longevity is a decent indication that a trader’s performance has not been a fluke and exemplifies their survival skills in different market conditions.

Drawdown

The drawdown measures the extent of a manager’s equity reduction from its peak to the lowest point as a percentage. For instance, if the balance of an account moved from $10 000 to $9 000, this would be a 10% drawdown.

Drawdown is one of the most critical risk management metrics as it alerts investors how much capital a manager may lose at any time. Of course, the lower, the better, generally not above 20%, and any figures above this mark should be treated as a red flag.

Profit factor

This statistic divides the gross profit by the gross loss. A profitable account always shows a profit factor of 1 or above. We may also consider the profit factor as the risk to reward. 

For instance, if a manager’s profit factor is 2, it means they pocket twice the amount of money they risk on average, a commendable achievement. Hence, the higher, the better. If we couple this with a healthy drawdown, it would suggest a highly profitable manager with solid risk-to-reward management.

Of course, these are only some of the statistics to consider. Yet, they all relate to the risk side of things and are more crucial than the gains.

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How to start trading with forex managed accounts?      

Before you think of trading with forex managed accounts, you’ll want to spend a few weeks learning some basic educational material about the foreign exchange to understand the risks involved. 

Another aspect to cover at this stage is the various performance metrics you’ll encounter when choosing a manager, like a drawdown, the different percentage gains, profit ratio, Sharpe ratio, etc. 

Once the investor has acquired all this knowledge, they can do the following:

• Shop around for properly regulated, reputable brokers with fast deposits/withdrawals and the lowest overall trading costs.
• Once you’ve found the preferred broker, consider your growth expectations based on the amount of capital you wish to allocate
• The next step is looking at the performance stats of the various traders and choosing one aligning with your objectives
• Once you’ve chosen a fund manager, observe the performance/management fees, other relevant costs, and the limited power of attorney agreement before deciding to invest.

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