FOREX provides two main directions which are accessible to all. It is personal trading in currency market and investments in Forex.
Both directions have its own pros (positives) and cons (negatives) and each is suitable for different people with different needs. Most important thing for you is to choose correctly between trading and/ or investment, which ever suits you best.
Once you have analyzed potential of FOREX market you get the impression that a big chunk of those interested in this industry are most likely to choose personal trading, which broker companies and organizers of FOREX trading training course are trying to imply as easy to 'crack' for anybody just in few days. Well, the unfortunate thing is that most beginners in Forex trading and the ones that have been doing it for a while with demo trading and from time to time "buried" their live account (even if it's small) - are stuck. They are stuck because they have chosen the wrong route: at any cost to become professional traders ignoring the possibilities to earn money in the meantime from FOREX. Loss after loss after loss – so 'The Chinese' whisper starts that FOREX is a casino, gamblers and fraudsters market in which a layman cannot make money.
Becoming a successful trader should only be a part of the final objective for the beginner as it requires being prepared morally, psychologically, physically and financially. You must understand that even if you are prepared there are still no guarantees that you will succeed on your own. The most rational view which pays off is investing into FOREX and creating an investment portfolio. In this way when you invest your money strategically and diversify it into different groups and risk's you can make the most out of the investment by increasing your profit and splitting/reducing the risk.
What are the most popular capital diversification options in Foreign Exchange?
There are a number of FOREX investment types, but only two the most popular ones: first it is the automated trading with an Expert Advisor (EA) also known as (aka) FOREX Robots. Second - passing on part of your investment to professional trader aka (Money Manager), who has a long successful trading experience. Money Managers receive an agreed percentage of generated profit.
What is automated trading or Robots?
Forex Robots- it is a computer program most commonly used with MetaTrader4 platform. This program performs transactions of Foreign Exchange market according to special rules and instructions. Once the convenient market situation arises based on the instructions it programmed to follow Forex EA's (opens, sells, closes the trade or does whatever it is set to).
The biggest advantage of EA's is that they can trade without any influences of human emotions like, fear, impatience, rushing, lack of discipline, adrenaline rush (passion), revenge, greed and so on) and that of course guarantees the trading strictly by the rules which increases the chances of your profit to grow.
Robots don't need to sleep, eat, wash; it doesn't go out on dates, doesn't get sick or has any other things to take care of, so it has all the time in the world to trade and make money for you. Once you have established the guidelines which control your capital, the risk and the profit, you can be sure, that during trading the Robot won't decide to move STOP/LOSS or increase TAKE/PROFIT like often traders do. This is where greed often makes us catch more S/L and less T/P. If the Robot produces some negative results and it is set to stop at a particular time it will, where a trader can be influenced by human emotion and trading can turn into gambling.
There is of course the other side of the coin. There are large numbers of Robots available on search engines. If you Google the key words like 'forex robots or EA's' you will get a large variety of different automated programs offered. In vastly growing Foreign Exchange market there is huge demand for such programs. It also creates possibilities for bogus manufactures to make money by selling bogus Robots to you. Of course they are very well promoted and not necessary a new program, it could be a program that hasn't worked well in that past, then re-named and re-sold as a new product. Most of the time they show perfect past performance results and work well on demo account. When you move it to live trading, most often, it cannot repeat its performance.
Another point which is widely discussed by majority of the traders is that all robots have draw downs! Question – don't real traders have them? Ask yourself how many draw downs or 'berried' deposits have you had until now? In the real world you wouldn't find an ideal trading system which wouldn't have draw downs nor will you find such a robot. However, if you have correctly diversified your capital (i.e. that you have rationally divided your money into different channels and have not invested everything into one FX venture) and one or the other money making machine has a draw down it's not such a big deal, because the most important thing is that the capital of your portfolio is always growing.
What is Money Management and PAMM accounts?
The other popular investment method is allowing professional money manager to manage part of your capital and paying them an agreed percentage of the profit. This kind of investment has been there for a long time but affordable only for people have large capital (100 K +). Today, times have changed and now anyone with as little deposit as a 100 USD can use the advantages of this type of investment.
There are few Forex brokers companies and other capital management companies who provide capital management services via PAMM accounts (For more information visit FOREXabc). What is that? A professional trader can allow a few or a dozen investors, for an agreed percentage of the profit, connect to his account with your own account. When the trader acts, these same actions will be repeated in all connected PAMM accounts.
It is recommended to choose PAMM accounts only where the trader personally has invested a reasonable amount of his money, some brokers demand (visit FOREXabc for the brokers) that the manager of accounts would invest 2000 EUR or 3000 USD of his own capital and only then he could manage other people's money. This way the investor gets more confidence as trader is also trading his own money. PAMM Account managers aim is to responsibly grow the capital as he gets paid the percentage of accumulated profit. Trader personally decides the minimum amount of initial investment he will accept for his PAMM Account. In case of Alpari you could start investing with as little as 5 EUR on few accounts but on average the initial investment starts from 100 USD.
Management of your capital has more benefits, besides the fact that you don't need to have any knowledge about Forex trading or have time for it. First of all manager is interested in stability and long growth of the investment of his managed PAMM Account because if he fails he would also lose his deposit. Second of all, many traders show their trading statistics where you can easily see how long they've been trading, what is their P/L ratio, how many draw downs they have (in percentages), what is their recovery factor, how many investors are already connected to their PAMM account and what is the total of the managed capital including traders personal money. Another advantage of this kind of investment is an opportunity to talk to the manager himself, get live updates. All of this provides you with a clear view of the situation and allow you to make an informed decision on who you will entrust with your money. Traders who are capable of making a 1000% or more a year are either asking for a big chunk of the profit or higher investment which is around 500-1000 EUR. However, there is a wide range of choices and you can definitely start with 50 USD or EUR and enjoy the ride.
You can also find private traders who offer to trade with your money at an agreed profit percentage however, before you decide on this sort of investment; do strongly consider the pros and cons.
First of all, private traders not always want to show their trading statistics, past history or live trading results, number of investors, size of the capital or what their personal deposit if any and so on. Second of all, what often happens is that private traders, different to professional broker companies who have bigger technical possibilities, can't always guarantee to repeat the same actions in all managed accounts simultaneously. Because of delays, slippages and spread widening, incomplete trading deals and so on, it is almost impossible to manage many accounts at the same time, and different investor's accounts could have different statistics.
Therefore, when you decide to entrust your money to be managed by someone else it is better to choose a trustworthy way to connect to PAMM accounts, with a company offering these services will take care of the technical side instead of private trader.
How to choose Robots and PAMM Accounts that are worth investing in?
It is so easy to get lost when there are so many companies offering trading Robots and Money Management services. In order to choose wisely, which robot or PAMM Account to invest your money into, you either need to have reasonable knowledge about FOREX trading (to understand how to evaluate presented statistics and its reliability) or find informational websites, like FOREX-abc.com , who personally test and invest money into Robots and different PAMM Accounts. Here you can get advice on how to create an investment portfolio, relying on our personal LIVE experience. Together with a chosen investment channel you must remember the fundamental factor – "MM" correct management of your investments. Only well diversified portfolio can be successful and long term profitable.
'Money Management' - main points to consider when making a risk management plan
The Risk/Profit Management Plan is actually one of the most important factors to success in either personal trading , creating your own portfolio or both.
Below are the main aspects that have to be included in your "MM" plan:
* Risk Management – first of all you have to work out your budget for Forex trading or investments. Then, what part of that budget you can allow yourself to risk freely and what will you do if you lost that part of the budget?
* Diversification of the capital – make the most of Forex investment and trading opportunities and minimize the risk by diversifying your capital to different ventures (Robots / PAMM Accounts and if you wish-personal trading yourself).
* Profit management– anticipate what you are going to do with the profit: what part of the profit and where will you re-invest – increase the size of current portfolio, cash it out: i.e. withdraw part of the money to compensate the initial investment and continue to re-invest the rest.
For more information on 'Money Management', its importance and aspects of it please go to FOEX-abc.com
What is the most rational way to distribute your capital in different ventures? Is it possible to make the capital diversification plan yourself? Where do I get help?
It is very important to diversify your investment and correctly allocate the percentage of the capital per different channel. This will minimize your risks considerably and potentially stabilize your profit which will allow you to take maximum advantage of all opportunities that FOREX market provides. This sort of plan should be done on individual basis taking into account your financial situation and risk tolerance.
To be able to make this plan yourself you must have experience in currency trading and know some of the specifics. However, if you want a diversified Forex investment, but you have no knowledge or time, get in touch with us.
Do all brokers offer capital management services?
Only few bigger broker companies offer capital management services to it's customers because need huge recourses on the technical side. One of our partners who offer PAMM Account services. At FOREXabc you can find some most profitable, effectively working PAMM Account Managers. You can connect to these traders PAMM Accounts from as little as 50 USD.
Can you combine the two – personal trading and Forex investments?
Passing on your money to Money Manager (robots or traders) and personal trading are most common opportunities in FOREX market and it could be combined together. If you are determined to trade personally, you need suitable conditions so prepare yourself: to sit at a computer for a very long time to learn the market. You have to have spare (not borrowed or last remaining) money, which you are likely to lose a few times while learning. If you are ready for that – start trading personally, but be patient, disciplined and stick to the main trading and Risk-Profit Management rules and under no circumstances invest the whole amount into one venture. Distribute your money into different investments, leaving only some money for personal trading (i.e. 1/10) – this is the only way to make the most out of what diversification.
Either way, before you decide, ask yourself this: do you really want to and are you really ready for a long and intense work or would you rather prefer to use already well established investment channels, which will work for you: AND EMPLOY YOUR MONEY TO MAKE YOU MONEY.
FOREXabc Team
Both directions have its own pros (positives) and cons (negatives) and each is suitable for different people with different needs. Most important thing for you is to choose correctly between trading and/ or investment, which ever suits you best.
Once you have analyzed potential of FOREX market you get the impression that a big chunk of those interested in this industry are most likely to choose personal trading, which broker companies and organizers of FOREX trading training course are trying to imply as easy to 'crack' for anybody just in few days. Well, the unfortunate thing is that most beginners in Forex trading and the ones that have been doing it for a while with demo trading and from time to time "buried" their live account (even if it's small) - are stuck. They are stuck because they have chosen the wrong route: at any cost to become professional traders ignoring the possibilities to earn money in the meantime from FOREX. Loss after loss after loss – so 'The Chinese' whisper starts that FOREX is a casino, gamblers and fraudsters market in which a layman cannot make money.
Becoming a successful trader should only be a part of the final objective for the beginner as it requires being prepared morally, psychologically, physically and financially. You must understand that even if you are prepared there are still no guarantees that you will succeed on your own. The most rational view which pays off is investing into FOREX and creating an investment portfolio. In this way when you invest your money strategically and diversify it into different groups and risk's you can make the most out of the investment by increasing your profit and splitting/reducing the risk.
What are the most popular capital diversification options in Foreign Exchange?
There are a number of FOREX investment types, but only two the most popular ones: first it is the automated trading with an Expert Advisor (EA) also known as (aka) FOREX Robots. Second - passing on part of your investment to professional trader aka (Money Manager), who has a long successful trading experience. Money Managers receive an agreed percentage of generated profit.
What is automated trading or Robots?
Forex Robots- it is a computer program most commonly used with MetaTrader4 platform. This program performs transactions of Foreign Exchange market according to special rules and instructions. Once the convenient market situation arises based on the instructions it programmed to follow Forex EA's (opens, sells, closes the trade or does whatever it is set to).
The biggest advantage of EA's is that they can trade without any influences of human emotions like, fear, impatience, rushing, lack of discipline, adrenaline rush (passion), revenge, greed and so on) and that of course guarantees the trading strictly by the rules which increases the chances of your profit to grow.
Robots don't need to sleep, eat, wash; it doesn't go out on dates, doesn't get sick or has any other things to take care of, so it has all the time in the world to trade and make money for you. Once you have established the guidelines which control your capital, the risk and the profit, you can be sure, that during trading the Robot won't decide to move STOP/LOSS or increase TAKE/PROFIT like often traders do. This is where greed often makes us catch more S/L and less T/P. If the Robot produces some negative results and it is set to stop at a particular time it will, where a trader can be influenced by human emotion and trading can turn into gambling.
There is of course the other side of the coin. There are large numbers of Robots available on search engines. If you Google the key words like 'forex robots or EA's' you will get a large variety of different automated programs offered. In vastly growing Foreign Exchange market there is huge demand for such programs. It also creates possibilities for bogus manufactures to make money by selling bogus Robots to you. Of course they are very well promoted and not necessary a new program, it could be a program that hasn't worked well in that past, then re-named and re-sold as a new product. Most of the time they show perfect past performance results and work well on demo account. When you move it to live trading, most often, it cannot repeat its performance.
Another point which is widely discussed by majority of the traders is that all robots have draw downs! Question – don't real traders have them? Ask yourself how many draw downs or 'berried' deposits have you had until now? In the real world you wouldn't find an ideal trading system which wouldn't have draw downs nor will you find such a robot. However, if you have correctly diversified your capital (i.e. that you have rationally divided your money into different channels and have not invested everything into one FX venture) and one or the other money making machine has a draw down it's not such a big deal, because the most important thing is that the capital of your portfolio is always growing.
What is Money Management and PAMM accounts?
The other popular investment method is allowing professional money manager to manage part of your capital and paying them an agreed percentage of the profit. This kind of investment has been there for a long time but affordable only for people have large capital (100 K +). Today, times have changed and now anyone with as little deposit as a 100 USD can use the advantages of this type of investment.
There are few Forex brokers companies and other capital management companies who provide capital management services via PAMM accounts (For more information visit FOREXabc). What is that? A professional trader can allow a few or a dozen investors, for an agreed percentage of the profit, connect to his account with your own account. When the trader acts, these same actions will be repeated in all connected PAMM accounts.
It is recommended to choose PAMM accounts only where the trader personally has invested a reasonable amount of his money, some brokers demand (visit FOREXabc for the brokers) that the manager of accounts would invest 2000 EUR or 3000 USD of his own capital and only then he could manage other people's money. This way the investor gets more confidence as trader is also trading his own money. PAMM Account managers aim is to responsibly grow the capital as he gets paid the percentage of accumulated profit. Trader personally decides the minimum amount of initial investment he will accept for his PAMM Account. In case of Alpari you could start investing with as little as 5 EUR on few accounts but on average the initial investment starts from 100 USD.
Management of your capital has more benefits, besides the fact that you don't need to have any knowledge about Forex trading or have time for it. First of all manager is interested in stability and long growth of the investment of his managed PAMM Account because if he fails he would also lose his deposit. Second of all, many traders show their trading statistics where you can easily see how long they've been trading, what is their P/L ratio, how many draw downs they have (in percentages), what is their recovery factor, how many investors are already connected to their PAMM account and what is the total of the managed capital including traders personal money. Another advantage of this kind of investment is an opportunity to talk to the manager himself, get live updates. All of this provides you with a clear view of the situation and allow you to make an informed decision on who you will entrust with your money. Traders who are capable of making a 1000% or more a year are either asking for a big chunk of the profit or higher investment which is around 500-1000 EUR. However, there is a wide range of choices and you can definitely start with 50 USD or EUR and enjoy the ride.
You can also find private traders who offer to trade with your money at an agreed profit percentage however, before you decide on this sort of investment; do strongly consider the pros and cons.
First of all, private traders not always want to show their trading statistics, past history or live trading results, number of investors, size of the capital or what their personal deposit if any and so on. Second of all, what often happens is that private traders, different to professional broker companies who have bigger technical possibilities, can't always guarantee to repeat the same actions in all managed accounts simultaneously. Because of delays, slippages and spread widening, incomplete trading deals and so on, it is almost impossible to manage many accounts at the same time, and different investor's accounts could have different statistics.
Therefore, when you decide to entrust your money to be managed by someone else it is better to choose a trustworthy way to connect to PAMM accounts, with a company offering these services will take care of the technical side instead of private trader.
How to choose Robots and PAMM Accounts that are worth investing in?
It is so easy to get lost when there are so many companies offering trading Robots and Money Management services. In order to choose wisely, which robot or PAMM Account to invest your money into, you either need to have reasonable knowledge about FOREX trading (to understand how to evaluate presented statistics and its reliability) or find informational websites, like FOREX-abc.com , who personally test and invest money into Robots and different PAMM Accounts. Here you can get advice on how to create an investment portfolio, relying on our personal LIVE experience. Together with a chosen investment channel you must remember the fundamental factor – "MM" correct management of your investments. Only well diversified portfolio can be successful and long term profitable.
'Money Management' - main points to consider when making a risk management plan
The Risk/Profit Management Plan is actually one of the most important factors to success in either personal trading , creating your own portfolio or both.
Below are the main aspects that have to be included in your "MM" plan:
* Risk Management – first of all you have to work out your budget for Forex trading or investments. Then, what part of that budget you can allow yourself to risk freely and what will you do if you lost that part of the budget?
* Diversification of the capital – make the most of Forex investment and trading opportunities and minimize the risk by diversifying your capital to different ventures (Robots / PAMM Accounts and if you wish-personal trading yourself).
* Profit management– anticipate what you are going to do with the profit: what part of the profit and where will you re-invest – increase the size of current portfolio, cash it out: i.e. withdraw part of the money to compensate the initial investment and continue to re-invest the rest.
For more information on 'Money Management', its importance and aspects of it please go to FOEX-abc.com
What is the most rational way to distribute your capital in different ventures? Is it possible to make the capital diversification plan yourself? Where do I get help?
It is very important to diversify your investment and correctly allocate the percentage of the capital per different channel. This will minimize your risks considerably and potentially stabilize your profit which will allow you to take maximum advantage of all opportunities that FOREX market provides. This sort of plan should be done on individual basis taking into account your financial situation and risk tolerance.
To be able to make this plan yourself you must have experience in currency trading and know some of the specifics. However, if you want a diversified Forex investment, but you have no knowledge or time, get in touch with us.
Do all brokers offer capital management services?
Only few bigger broker companies offer capital management services to it's customers because need huge recourses on the technical side. One of our partners who offer PAMM Account services. At FOREXabc you can find some most profitable, effectively working PAMM Account Managers. You can connect to these traders PAMM Accounts from as little as 50 USD.
Can you combine the two – personal trading and Forex investments?
Passing on your money to Money Manager (robots or traders) and personal trading are most common opportunities in FOREX market and it could be combined together. If you are determined to trade personally, you need suitable conditions so prepare yourself: to sit at a computer for a very long time to learn the market. You have to have spare (not borrowed or last remaining) money, which you are likely to lose a few times while learning. If you are ready for that – start trading personally, but be patient, disciplined and stick to the main trading and Risk-Profit Management rules and under no circumstances invest the whole amount into one venture. Distribute your money into different investments, leaving only some money for personal trading (i.e. 1/10) – this is the only way to make the most out of what diversification.
Either way, before you decide, ask yourself this: do you really want to and are you really ready for a long and intense work or would you rather prefer to use already well established investment channels, which will work for you: AND EMPLOY YOUR MONEY TO MAKE YOU MONEY.
FOREXabc Team
