1. What is an alternative investment?
An alternative investment is an investment other than conventional investments such as stocks, bonds, mutual funds and exchange-traded funds (ETFs). A managed forex account is one type of alternative investment. Many alternative investments including managed futures and managed forex accounts offer the use of a high degree of leverage, which can produce either significant gains or losses.
2. How do I open an account?
3. Do I have to open my own brokerage account in order to participate in a managed account program?
Yes, you have to open a Forex trading account with the broker used by the managed account program. We only feature programs that use highly reputable, NFA registered brokers who offer excellent customer service. You open the account in your name. It is illegal for any non FCM broker to accept funds in their own name. For more information in that area please read my article; How To Spot A Forex Scam.
4. These results sound "too good to be true". How can it be proven that the system really works?
We can't really answer that question directly since we are not the traders of these managed accounts. However by investing our own funds with a managed account for a period of time we are able to gain an understanding of the trading strategies and the risk management used. We believe that the managed accounts that passed our test will stand a much better chance of surviving for the long term than the vast majority of managed accounts offered on the internet.
5. I don't know anything about forex. Can I still benefit from a managed forex account?
It is not necessary to be a forex trader yourself to intelligently invest in a managed account. We encourage you to more fully educate yourself about forex.
6. Can I choose my own broker and ask the fund manager to use it for managing my account?
No. Your account must be opened at the same brokerage as all others under management in that program. The head trader for the program has access to software (PAMM; Percent Allocation Management Module) that allows trading of these accounts as a group -- but they must all be at the same brokerage for the trade manager to use this.
7. If I already have an existing self-trade account at the managed account's broker, can it be used in the managed program?
You can only use your existing account if it is with the broker used by the managed program AND you have converted it to a managed account. If you do this, that account can no longer be self-traded by you. If you wish to have both a self-trade account and a managed account, you must open a second account at the broker. In most cases this is quite easy, and consists of resubmitting the signature pages of your original account application, a signed Power of Attorney for the managed program, and a note to the broker asking them to open a second account. You can even ask them to transfer funds from your existing account, to get the new managed account funded.
8. My Investment Advisor recommends diversifying my assets. Do managed forex accounts have a place in a traditional portfolio?
Yes, allocating a percentage of your total assets to an alternative investment, uncorrelated to the stock & bond markets such as managed forex accounts, has historically shown an ability to provide a portfolio with better balance, reduced risk, and improved overall performance.
9. What is a Commodity Trading Advisor?
A Commodity Trading Advisor (CTA) is an individual or a firm, registered with the Commodity Futures Trading Commission(CFTC), that receives compensation for giving people advice on options, futures and the actual trading of managed futures accounts. Registrations for CTA’s are done through the National Futures Association, a self-regulated organization responsible for reviewing and accepting registrations. Please note that at this time forex traders are not required to be registered as CTA’s to manage clients' accounts.
10. Are your policies, practices and activities monitored or regulated by any government agencies?
Yes, we voluntarily registered our company as well as ourselves individually with PFG brokerage firm. PFG is regulated by the CFTC and NFA and is required to monitor all marketing and trading activities of companies that are registered with them.
11. Will I be able to access my account?
Yes, you will be provided with read only access to your account either through an online report viewer or the trading platform. You can view the account, including balance and activities, but you will not be able to place any trades.
12. Can I open my account as an IRA, and transfer funds from an existing IRA into it?
Yes!
The process simply requires having an IRA trustee set up the account at the brokerage for you. The one we recommend is Millennium Trust, who has an established relation with the brokers used by these programs. You would contact Millennium first, tell them which account program in which you wish to participate, and they will guide you through the process. There will be a small management fee that you will pay to them for acting as a trustee for your IRA. All the standard rules for an IRA will apply to your account, including those permitting transfer of funds from another existing IRA in this one!
Their site is http://www.mtrustcompany.com
13. Does the trader have access to my money and why do I need to sign a Limited Power of Attorney (POA)?
No, the trader does not have access to your money and cannot transfer, deposit, or withdraw your funds except for the fees specified on the POA and Management Agreement. Your account is set up directly with the brokerage that clears all transactions and handles all transfers, deposits, and withdrawals. It is necessary for you to sign a Limited Power of Attorney (POA) to authorize the brokerage to allow the trader to direct the trading of your account.
14. Does Best FX Investors invest their own funds into the managed forex accounts offered?
Yes, the principal of Best FX Investors invest with personal accounts with all recommended programs.
15. Does a managed account ever close to new investors? What if I am in the process of opening my account when that happens?
Yes, sometimes a managed program reaches a limit and must close to new investors. Usually, if you have already submitted your Account Application to the broker, your account will still be permitted to join the managed program. To make sure, however, you should always fund your account as soon as possible. Many brokers will allow you to submit funds at the same time as your application, to speed up the process.
16. What is the minimum I can invest using managed forex accounts?
The minimum at this time is $25,000.
17. What kind of volatility do managed forex accounts exhibit?
In general, accounts with higher returns will also have higher volatility and draw downs. What is considered higher returns with traditional investments is normal with a good forex trader. The historic max peak to valley draw down for the 007 trading program is only 7%. Please read our report on why peak to valley draw downs is the only true way to measure risk. Past maximum draw downs are no guarantee of future draw downs but a safety contract has been put in place on our broker approved paperwork that all trading stops if a 30% draw down were ever to occur. We do not anticipate that based on the positive past performance and low draw downs but put in place for clients comfort.
18. Can I withdraw my money and close my account any time I want?
Yes. This typically takes one to three days.
19. How do I fund my brokerage account?
PFG accepts funding by bank wire or personal check, cashier's check, or bank draft, but not by credit card.
20. Do I need to keep my money in the managed account for a certain period of time to avoid penalties like mutual funds?
No, there are no penalties for withdrawing from the managed account program at any time you choose.
21. If I do not withdraw profits, do they reinvest -- i.e. compound -- automatically?
Yes, eventually profits left in your account will be considered an addition to principal, and will be factored into trade size calculations for future trades. How long it takes before they are included varies according to when new clients are added to the master account. It could take up to a week before your profits were fully reinvested.
22. Once my new account is funded, how long before it will start being traded by the fund manager, when will I start seeing trades being placed?
As soon as your account is funded, the trade manager for the managed account sees that it is ready for inclusion in the next new cycle of trades -- you need do nothing, the trade manager is automatically alerted by the broker. Typically trading will start within 48 hours from when the broker receives the wire.
23. How do I verify the status of my account?
When your managed Forex trading account is opened at the broker, you are issued a Username and Password which enables you to view and monitor the status of your account
24 hours a day. Through this Login, you can view a complete history of all closed trades as well as the status of any open trades.
24. If I have a question about trades in my account, who do I contact?
The broker is the main contact for all questions about your account. Because we refer a lot of clients, there are particular people in the brokerage who are most familiar with the managed program in which you are participating. In the Instructions for filling our Account Application, we give you the direct contact information for these people. You will not have direct contact with the trader. Sometimes the broker will refer questions about the trader or trading style back to us to answer if we can, because we are familiar with the trader's background. With a managed account you let the trader do the trading and periodically evaluate the results, however frequently you wish. We post daily and monthly results here which you can also check.
25. Can I stop my account from being traded at any time I choose?
Yes. To stop trading, you submit a revocation of the LPOA which originally authorized the trade manager for the managed program to place trades in your account. You submit this to the broker using the link found on the broker's web site. Their web sites are open 24 hours a day. To withdraw funds, you simply execute a withdrawal just as you would normally from any other brokerage account, according to the procedures the broker uses.
26. How is profit share/performance fee calculated?
What if there is a loss? At the end of the first quarter after your account begins trading, if there is a profit, the broker will deduct the performance fee/profit share, technically called the "incentive fee” that has been authorized on the Power of Attorney you sign when opening your account. Each quarter they will do the same. The incentive fee is a percentage of the net profits per quarter from the "watermark" of previous highs. If there are no profits in a given month, there are no incentive fees. The high equity point established after incentive fees are calculated creates the "watermark" which must be surpassed before any future profits may again be calculated. Example: you start with $100,000 in an account with an incentive fee of 35%, and during the quarter there is $20,000 in gross profit. The incentive fee deducted would be 35% of $20,000, which is $7,000, so your net profit would be $13,000, and your account would now have a "watermark" new balance of $113,000. If in the next quarter there was a loss of $10,000, there would be no incentive fee deducted, since there is no profit, and your new balance would be $103,000. Your "watermark" is still $113,000. In the third quarter, if there was $30,000 in gross profit, then the incentive fee would be calculated on only $20,000 of that, since the first $10,000 in profit gets your account back up to its "watermark" of $113,000. So the incentive fee would be 35% of $20,000, or $7,000, and your net profit for that month would be $23,000 (which is $10,000 + $13,000), and your new account balance would be the new "watermark" of $126,000 (which is $113,000 + $13,000).
27. Do I have to pay taxes on profits made in a managed Forex account?
You are responsible for paying all taxes on your income, according to the laws of your country. Profit made in your managed Forex account is income in every classification of which we are aware, upon which taxes would be due. Forex falls under the tax laws of Futures where gains are counted under the 60/40 rule. 60% is considered long term capital gains and 40% is considered short term capital gains even if all trades are short term trades. This is better then stocks that were traded short term because 100% of those gains must be considered short term capital gains and are subject to that higher rate.
28. Do the owners or employees of this website manage these accounts?
No. We have searched the financial world to find the best managed fund traders, who offer managed accounts at the best brokers, that offer you the best returns. You open your account yourself at the brokerage used for the account program. Your account is then managed by the trader, completely independently of us. Our role is to find the best opportunities for you, gather all the information you need to evaluate them and open your own account. You never send us any money, and we play no part in its management.
29. What are the benefits of portfolio diversification, such as by opening a managed Forex account in addition to my other investments?
Here are some reasons to diversify:
1) Investment advisors have always advocated diversification.
2) Most investor portfolios are heavily concentrated in the stock market and or bond market.
3) Most of the 8,000 mutual funds are highly correlated to each other and the market.
4) Protecting yourself from the risks associated with investment concentration is important to your financial well being.
5) Forex is not correlated to the stock market, so it provides true diversification to lower your overall investment portfolio risk.
6) Forex offers profit/loss potential regardless of market direction, unlike some other markets (no “Bear” Market).
30. I have more questions.
Please email the office today.
Glossary of Terms
# Appreciation - A currency is said to "appreciate" when it strengthens in price in response to market demand.
# Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
# Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.
# Balance of Trade - The value of a country's exports minus its imports.
# Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.
# Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215.
# Bid Price - The bid is the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.
# Bid/Ask Spread - The difference between the bid and offer price.
# Big Figure Quote - Dealer expression referring to the first few digits of an exchange rate. These digits are often omitted in dealer quotes. For example, a USD/JPY rate might be 117.30/117.35, but would be quoted verbally without the first three digits i.e. "30/35".
# Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a 'dealer' commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
# Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.
# Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
# Central Bank - A government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
# Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.
# Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the position.
# Collateral - Something given to secure a loan or as a guarantee of performance.
# Commission - A transaction fee charged by a broker.
# Counter Currency - The second listed Currency in a Currency Pair.
# Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
# Cross Currency Pairs or Cross Rate - A foreign exchange transaction in which one foreign currency is traded against a second foreign currency. For example; EUR/GBP.
# Currency Symbols
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
USD- US Dollar
JPY - Japanese Yen
GBP - British Pound
CHF - Swiss Franc
# Currency Pair - The two currencies that make up a foreign exchange rate. For Example, EUR/USD
# Currency Risk - the probability of an adverse change in exchange rates.
# Dealer - An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
# Deficit - A negative balance of trade or payments.
# Depreciation - A fall in the value of a currency due to market forces.
# Devaluation - The deliberate downward adjustment of a currency's price, normally by official announcement.
# Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
# Euro - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).
# European Central Bank (ECB) - the Central Bank for the new European Monetary Union.
# Federal Reserve (Fed) - The Central Bank for the United States.
# Flat/square - Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.
# Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.
# Fundamental Analysis - Analysis of economic and political information with the objective of determining future movements in a financial market.
# FX - Foreign Exchange.
# G7 - The seven leading industrial countries, being the US, Germany, Japan, France, UK, Canada, Italy.
# Going Long - The purchase of a stock, commodity, or currency for investment or speculation.
# Going Short - The selling of a currency or instrument not owned by the seller.
# Gross Domestic Product - Total value of a country's output, income or expenditure produced within the country's physical borders.
# Gross National Product - Gross domestic product plus income earned from investment or work abroad.
# Hedge - A position or combination of positions that reduces the risk of your primary position.
# Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.
# Initial Margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.
# Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks.
# Leading Indicators - Statistics that are considered to predict future economic activity.
# Leverage - Also called margin. The ratio of the amount used in a transaction to the required security deposit.
# Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received.
# Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability.
# Long position - A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.
# Lot - A unit to measure the amount of the deal. A standard size Lot is $100,000 (or $100K).
# Margin - The required equity that an investor must deposit to collateralize a position. \
# Margin Call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
# Market Risk - Exposure to changes in market prices.
# Mark-to-Market - Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.
# Maximum Drawdown - Maximum drawdown means the most that a system has ever gone down from a previous high (peak to valley), usually measured in terms of percentage of the peak value.
# Offer (ask) - The rate at which a dealer is willing to sell a currency. See Ask (offer) price.
# Open position - An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.
# Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.
# Overnight Position - A trade that remains open until the next business day.
# Pips - The smallest unit of price for any foreign currency. It is 0.0001 in most cases, but 0.01 for JPY. Also called Points.
# PAMM - Percent Allotment Management Module.
# Position - The netted total holdings of a given currency.
# Price Transparency - Describes quotes to which every market participant has equal access.
# Profit /Loss or "P/L" or Gain/Loss - The actual "realized" gain or loss resulting from trading activities on Closed Positions, plus the theoretical "unrealized" gain or loss on Open Positions that have been Mark-to-Market.
# Range - The difference between the highest and lowest price of a currency recorded during a given trading session.
# Rate - The price of one currency in terms of another, typically used for dealing purposes.
# Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.
# Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
# Roll-Over - Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies. This occurs every day at 5:00PM EST.
# Round Turn (or Round Trip) - Buying and selling of a specified amount of currency, basically meaning one completed trade.
# Short Position - An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.
# Slippage - The difference in price between what the computer signal indicates and the actual price that gets executed on the trading platform. For example: if the computer signals a "buy" at a price of 1.3200 and the trading platform actually executes the "buy" at 1.3202, there would be 2 pips of "slippage" or difference between the signal price and actual execution price.
# Spread - The difference between the bid and offer prices.
# Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Stops are often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.
# Support Levels - A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
# Technical Analysis - An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.
# Unrealized Gain/Loss - The theoretical gain or loss on Open Positions valued at current market rates. Unrealized Gains/Losses become Profits/Losses when position is closed.
# US Prime Rate - The interest rate at which US banks will lend to their prime corporate customers.
# Volatility (Vol) - A statistical measure of a market's price movements over time.
# Whipsaw - slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
RISK DISCLOSURE: There is a substantial risk of loss in trading off exchange forex exchange products (FOREX). You must be aware of the risks and be willing to accept them in order to invest with the forex market. Do not trade with money you can't afford to lose. This website is neither a solicitaion nor an offer to Buy/Sell forex contracts. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on the website. The past performance of any trading system or methodology is not necessarilyu indicative of future results.