Managed Forex Accounts are fully segregated accounts individually owned by each investor at a brokerage firm, but managed (traded) by a professional trader or money manager on their behalf. Clients retain full control over their accounts at all time, as their money managers are granted “trade only” access to the accounts. It is a very unique and well-structured model.
How it works, is the investor opens up a trading account at a reputable brokerage firm, usually one of the trader’s preference. The investor then funds their account. No one can touch the money in this account but the investor. The trader cannot even deposit or withdraw funds from the investor’s account without the proper authorization to do so, and the investor retains full access and control over the account at all times. This is in essence, the investor’s trading account.
Where this differs slightly though from a regular self-directed trading account, is that being a managed account, it gets placed on a “master block” that allows the investor to have their funds traded professionally by an experienced trader or money manager via a document they sign which is called a Limited Power of Attorney agreement (LPOA). This document is an agreement between the trader and the investor which enables the trader to trade an investor’s account on their behalf without the investor having to transfer the funds into the trader’s account. It is the ideal way to have your money traded for maximum safety, control, and true transparency. Investors can check the balance of their account at any time, see the daily trade activity, or withdraw or deposit funds whenever they please. They can also revoke the LPOA agreement at anytime if they are not happy with how the trader is managing their funds. This gives them the ability to “opt out” at anytime. There is no lock in period.
The on the traders side, they trade all investor’s accounts as one large master account using PAMM or LAMM, or MAM software and technology which is offered by most leading brokers. The PAMM (Percent Allocation Management Module) distributes gains, losses and fees on an equal percentage basis. In this way all accounts regardless of size obtain the same percentage returns. The LAMM (Lot Allocation Management Module) allows the trader to allocate different trade lots to each investor’s account. This grants the trader the flexibility to use different leverages for different types of investors. The MAM (Multi-Account Manager) is a combination of the features found in a PAMM and LAMM, and offers more flexibility to the trader managing investor accounts. This is all handled by the trader and the brokerage, making it seamless for investors to participate.
Investors have live read only access to their managed account at all times, either through an online report viewer or directly through the trading platform. They can then view their account, including balance and profit and open and closed trades, however they will not be able to place their own trades on the account, unless they revoke their LPOA, which as stated, is the document that enables the trader the ability to trade on their behalf. No other structure to our knowledge gives client’s as much control, access, flexibility and true transparency as that found in the Managed Forex Account structure.