How Not To Lose All Your Money With A Managed Forex Account

How Not To Lose All Your Money With A Managed Forex Account

Managed forex accounts present a decent opportunity for those who don’t have the time to learn how to trade forex or enough time to actually trade their own forex account to still make some profits from the forex market. They also open up investors to the triple threat of scam, incompetence, and bad brokers.

The first problem is that there are plenty of managed account scams out there. In some ways, these are much worse than forex broker scams or forex product scams. Managed account scammers usually try to get victims to invest as much money as possible, even their entire life savings. Sometimes they suggest taking out a mortgage on the victim’s house or securing other loans so that even more money can be invested. Falling for this kind of scam can ruin your entire life. As if this wasn’t bad enough, even a legitimate forex account manager can still wipe out your account through incompetence.

To avoid the most common managed account scams, you first must learn to differentiate between a normal managed forex account and a pooled account. In a normal managed forex account, the account is in your name, and the money goes from you to your forex broker. In a pooled account, you send your money to the account manager who is then supposed to pool the money from various clients into a trading account that the account manager controls.

Although there are legitimate pooled accounts under management, pooled accounts are MUCH more susceptible to fraud. Anyone with a computer can create fake account statements. With a pooled account, you can’t ever be sure where your money is. Many of these types of accounts guarantee a large monthly return on investment. There is no such thing as a true guaranteed high percentage return on investment in forex, and anyone offering one is 98% likely to be a fraud. The other 2% of the time, the person is merely an over-enthusiastic idiot. Either way, kiss your money goodbye.

But wait! You have a friend who invested and has been getting checks for the guaranteed 10% monthly return on their investment every month for over a year now. It must be legitimate.

I’m sorry, but what you’ve just described is almost guaranteed to be Ponzi scheme, named after the very infamous Charles Ponzi. It works like this:

The account manager gets one person to invest. The amount of money doesn’t matter. Returns of anywhere from a few percent per month to 20 or even 30% per month are guaranteed. Here’s the good part. NONE of the money is ever invested in the forex market. If the account manager promises 10% per month, the money can be hidden in a mattress and the payments maintained for 10 months. You might think this is a foolish way for the manager to make money, but it isn’t. He tells his first victim that by reinvesting half (or more) of that 10%, the account will grow faster. Next, he tells the first victim that if the total amount in the account is increased, the guaranteed percentage of return can also be increased. Of course, this deal is so great that many people will tell their friends and family about it. Some of these account managers will even offer incentives to customers who refer other customers. As long as more money from the existing clients as well as from new clients keeps coming in faster than money is paid out, the account manager doesn’t have to waste one second of his time risking money in forex trades. A well run Ponzi scheme can go on for several years, even while paying pretty good returns to investors. The problem is that the moment there’s any significant drop in new investment, the whole thing will collapse very quickly, that is if the scammers don’t decide to take the money and run even sooner.

Back to our example above where your friend was telling you all about those 10% monthly returns. Ask your friend if he or she has invested even more money since starting to take advantage of the high returns. Ask how many others have signed up based on your friend recommending this miraculous account manager. I’ll bet you a fist full of pips that your friend has not just been throwing more money in, but has also been recruiting others.

Even worse, sometimes, these Ponzi-style scammers don’t even bother to pay out money. Instead, they’ll try to get you to reinvest it all, or offer much higher rates of return with an automatic reinvestment plan. When the time comes to withdraw some of the money, there will have a be a pile of wildly varied excuses for delays in transferring funds, combined with more concerted efforts to try to lure the victims into putting even more money in with offers of better returns in the future. Of course, in this “Ponzi with no payout” scenario, the only ones getting any money are the scammers.

Within the United States, there is one very obvious warning sign of large-scale financial fraud of this sort. Using the US Mail for fraudulent purposes brings a whole lot of additional investigation and extra criminal charges. Sure, it’s nice of the company to use an expensive overnight courier service to deliver important documents, but every legitimate financial company I’ve ever dealt with in the USA sends at least some items by postal mail. If a company absolutely refuses to ever use the post office for even minor items, it almost inevitably means that they are trying to avoid a mail fraud charge.

Another GIANT red flag is if the managed account company only accepts some form of e-currency (excluding PayPal – they do try to investigate scam and fraud claims, many others don’t). Managed forex accounts often involve very large sums of money. You aren’t buying a product. You are loaning them YOUR money to invest. If a managed forex company refuses to accept a check or even a wire transfer, this means that you have no way to know what bank all of your money is going into, or even what country it’s going to. If you want to spend $200 on an EA, you don’t really need to know where someone’s bank is. If you are investing your life savings, you do.

Even if a pooled account does not offer guaranteed returns, it is still a risky investment. You are placing all of your money into the hands of an account manager. Even if the manager is legitimately trading forex and is very skilled, you are counting on this person to not make some kind of colossal mistake with your money. Considering the risks, I would never recommend investing in a pooled account without having an incredibly extraordinary amount of proof that the company is legitimate and the account manager is an amazing forex trader who always follows strict risk management rules. Even then, all it takes is for the good account manager to give into temptation, and all the money can disappear in a day.

OK, so if you’ve taken my advice and decided to avoid pooled accounts, does this mean your money is safe? Not quite.

A normal managed forex account keeps YOUR money in YOUR forex account with a forex broker. You will sign a Limited Power of Attorney (LPOA) granting the account manager the right to trade your account, and have a contract specifying how the account manager gets paid. You will be able to login and see exactly what trades are being placed and what your balance is in real time. This is good, but there are still some serious issues to consider. Do not just give your account number and password to someone or some company without having a contract and signing an LPOA. They might not be able to take money directly out of your account, but they can still send you on a one way trip to a margin call.

There are three ways your account manager can get money out of a normally managed forex account. The first two are obvious. The account manager (or account management company) may charge a flat fee every month and/or a commission based on the profits of the month, and these will generally be taken directly from your account as specified in your contract and LPOA. Either or both of these can be legitimate, and should be clearly disclosed in advance. The third way can turn even a good account management system into a ravenous beast that will eat away at your profits and maybe even your principal.

The third way that an account manager can get money out of your forex account works like this. Some account managers will only manage your account if you sign up through them with their preferred forex broker(s). This usually means that the account manager is also acting as an IB of that broker and getting a cut of the spread or commission charged by your forex brokerage for every trade made in your account (whether by you or by your account manager). The result is that more trades equals more profits for the account manager, whether you profit or not. Under these circumstances, a lot of account managers will make many more trades solely to gain these commissions on spread. In the stock market, this activity is called churning the account. There are some legitimate account management firms that do only trade accounts that they are IBs for, but you need to be aware that the temptation to churn your account will always be there in these cases. If you decide to go with such a forex account management company, discuss carefully with them about how many trades and how big of trades they will place in a typical month. The other drawback to this arrangement is that it restricts your ability to choose a forex broker that is good for any other forex trading needs you might have. It also means that you might get a good account manager, but be stuck with a poor forex brokerage that greatly reduces the profits that should be coming into your account.

Back to the monthly fee and commission on profits: Some companies charge only a monthly fee, others charge a percentage of your monthly profits, and others charge both. If the monthly fee is too high, it will eat all your profits (if there are profits). If the percentage of the monthly profits is too high, what’s the point of making any profit? Make sure that any percentage of monthly profit is based on the “high water mark” for your account. This means that if your account drops in value, the account manager doesn’t get a percentage of any new profits until all prior losses are made up and a new higher total amount of money in your account is reached.

What would reasonable fees be? That depends on your account, the skill of your account manager, and your investment objectives. If you have a $10,000 account and are charged $500 per month by your account manager, then that manager needs to average more than 5% gains per month or you will be losing money. On the other hand, if you had $50,000 in the account and still only paid $500 per month to have it managed, then the account only needs to exceed 1% average monthly return to keep gaining in value. For commissions on profits, I haven’t looked at too many managed forex companies, but have seen rates ranging from less than 25% to as over 50%. If the account manager can average significantly more than twice the returns you can get by yourself, then 50% might be reasonable. Otherwise, it’s too much. The calculations get more complicated if you get charged a monthly fee and a percent of profits.

For forex managers who charge a monthly fee, ask if the first month can be a free trial. Also, ask if they waive the fee if there are no profits for one or more months. You are paying them the fee to make profits, not to use your account to practice trading. Any legitimate trader will have occasional drawdowns, but there should be no reason to pay a fee if the drawdowns stretch over several months. Of course, you already know you should get any promises about fees in your LPOA and contract.

If the forex management company is in the US, ask if they are registered with the NFA and the CFTC. For the most part, this is a requirement, but there are a few loopholes to this rule. I would definitely suggest avoiding any US company that isn’t listed with the NFA and CFTC. Verify this by going to the NFA and CFTC websites to check that they are registered, do they have any complaints, and is the registration active or not. DO NOT trust the link from the managed account company’s website – it could be designed to take you to a faked version of the real websites. Wow! I was almost done editing this article and got a message from a friend about a managed account company that showed how safe it was because it was registered with the Securities and Exchange Commission. I had to look very closely at the certificate they displayed to see it was the SEC in the Philippines, not in New York.

For other countries, check the regulators closely. One of the most recent FPA Scam investigations was of a company that also listed a regulator’s website. That site was for a regulatory body that did not exist and only was there to appear to prove that the company was registered. Check the regulators website carefully. How many companies do they claim to regulate? If it’s only a few, that would make me suspicious that the regulator is fake Are there any signs of any enforcement actions against any company? If not, the regulator may be real, but lack any authority to do anything. Run a web search on the regulator and see how many links you get. Any real regulator should have quite a few, and some of them should be from websites belonging to the government in the country it’s based in.

So, you’ve avoided pooled accounts, found your own broker (possibly by using my method of broker selection), verified that the account manager or account management company is properly licensed and regulated, and has no major complaints filed with regulators. Do you feel safe? You are definitely safer, but you aren’t done yet.

Incompetence can erase your forex account balance just as quickly as fraud. Before signing that LPOA, make sure you understand the concept of risk management and discuss how the account manager will control risk. See if you can get a contract that specifies the maximum risk per trade along with the maximum total risk to be taken at any time. This should at least give you some legal leverage if your account is severely drawn down by improper risk management. Even then, login and check your account every few days, if not more often. Your excellent manager might go on vacation and the person who substitutes might not be nearly as good.

Of course, you should have already checked FPA’s Managed Forex Reviews and done a web search on the account management company and/or account manger that you will be dealing with. Remember that a lack of negative information on the web is NOT the same as an endorsement. The scam may be fairly new, so no one may have complained yet. Be wary if the website shows average returns going back years before the website was registered and ask questions about this. Of course, clever scammers may sit on a domain for an extended period or buy a domain that has been parked for years, just so their Whois records will seem properly aged.

When searching for information about the company on the web or in regulator websites, be careful if the names don’t quite match. A company called Perfect Acccounts, Inc may not or may not turn out to be the same company as Perfect Accounts, LLC or Perfect Accounts,Co. Legitimate forex companies often have similar names, and scammers will sometimes try to get a name that’s as close to a legitimate company name as possible in order to borrow some legitimacy.

Lately, I’ve come across some websites that provide comparison information about managed forex account companies. This looked a very useful service, until I checked one of them and found that all the forex account management services listed on the site offered referral fees. There may be some good comparison sites out there, but be aware that others are not there to do anything other that refer you to the company that pays them the highest fee for new client referrals.

If you want to invest your money in a managed forex account, be careful! Investigating before investing will take you a lot of time and effort. Then again, earning all of that money you want to invest also took you a lot of time and effort. Before you tell me that it’s too hard to check out a forex account manager or a forex management company, take a moment to imagine what you would do if your entire investment disappeared, either due to fraud or incompetence. Then come back and tell me if my suggestions are too much effort for you. If you are really thinking about putting your life savings into an account with someone based on them having a nice site on the internet or because your third cousin’s friend told you about them, either do the thorough investigation yourself or consider that it might be well worth hiring a professional investigator to check things out before placing hundreds of thousands of dollars under the partial or complete control of a stranger.

PLEASE do not ask me to recommend a forex account manager to you. I trade my own account and have never used one (but I might think about giving one a try in the future– if I see a solid track record with no hints of fraud). The reason I know enough to write this very basic article about this type of fraud is that I’ve traded stocks for many years before coming to the forex market. Additionally, my father used to be a stockbroker, and I got to overhear tales of investment fraud that were truly amazing (no, he wasn’t the criminal in those stories, or at least he never confessed it when I was listening). The types of fraud found in forex managed accounts are pretty much just repackaged versions of frauds found in the stock market and other trading markets. I also did some more digging around the web after writing about the forex account manager who got a nine year sentence for forex fraud and reading the FPA’s Scam Finding against the Forex Project of Luis Rivas to fill in a few more details about the subject.

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Pharaoh

Pharaoh

Pharaoh is one of the FPA's oldest members (he claims to be about 4000 years old, but we think he's exaggerating a little). He says he created the world's first trading pair (Cow/Goat) while ruling ancient Egypt. Although there are no archeological or historical records to support this claim, we can't find anything to disprove it. Although he's not as active at the FPA as he used to be, he still holds the highest post count of all FPA members.

We don't understand how he does it, but Pharaoh has an uncanny ability to spot scams faster than anyone else we've seen. He claims to have known a number of companies were HYIP scams just by their domain names and that each time an examination of the website proved him right. He's also famous inside Forex Peace Army for warning about Ponzi schemes, even ones run by large and well established companies. He's been in a number of threads trying to warn people away from active Ponzi schemes. In spite of the efforts of shills and those gullible enough to believe in free money to discredit his words, he keeps up the warnings. In each case, the company ended up either disappearing with all client money or being shut down by the authorities.

In addition to investigating scams, Pharaoh has written a number of articles on a wide rage of trading topics, including forex broker selection, risk management, and how to select a good account manager. He's also covered other items of interest to traders, such as protecting wealth and purchasing precious metals.

Pharaoh claims to be a business consultant, but says he makes most of his income by running a globe-spanning hamster smuggling operation. If we are to believe him, he's currently working on a network of hamster tunnels under southern Europe.

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Comments

tdaniels1947
11 years ago,
Registered user
Excellent article/post

Just joined FOREXPEACEARMY. Have read several of your posts-all have been excellent! By the way-I have lived in South Florida for 24 years. Some times it is too "sunny".
Pharaoh
11 years ago,
Registered user
Well, this should teach me to take a little more time researching articles. :D

There's yet another way for account managers to extract money. Some of them charge a fee "per lot traded" in your account. This means that churning accounts isn't just limited to account managers with an IB relationship.


A friend also pointed out to me that there may be more exemptions to NFA registration requirements for account managers in the spot forex market than I thought. I looked again. The regs clearly state that forex account managers must be registered with the NFA, then list a pile of exemptions. Personally, I'd feel safer with a registered account manager if the company is in the US.

My friend had a second suggestion. Some forex account managers or account management companies are independently audited. This is definitely a good thing. Just check to make sure the auditing company is truly an independent auditor and not really a company either working for the account manager or a company that's getting a commission for referring new clients for forex managed accounts.
wealth2wealth
11 years ago,
Registered user
HGNFX is one of the best managed account companies it deals with MIG Investments and offers a monthly earning between 5 and 15%
Pharaoh
11 years ago,
Registered user
Let's see...

Only works with one brokerage (and not a well rated one).

Contact page lists the broker's phone number and street address, but only email addresses for HGNFX. Do these people even have their own office?

Wants an absolute minimum of $50,000 to open an account (prefers $100,000). I can understand minimums for managed accounts, but these seem awfully high.

Claims 5 years experience, but the website was registered in Feb. 2008, less than 5 months ago. There are some account statements that go back 5 years, but there is no way to verify the authenticity of those statements.

Website is full of typos and grammatical errors. Surely a company with over 5 years experience and millions of dollars under management could pay someone a few hundred bucks to fix this.

They claim to be regulated by the Swiss Federal Department of Finance, yet also claim that all client funds are held by the Swiss Federal Department of Finance.

Claims to be audited. Searching the audit company's website shows no data on HGNFX or their broker. What's the point of being audited by an independent company if that independent company doesn't show the results on their website?

Claims your money is held in an independent account, but you are not allowed to place any trades.

I might have considered looking at their LPOA and other agreements, but these are only available via email, not via download.


Overall, I see a bunch of things that would make me hesitant to hand over $50,000-100,000 to them. Maybe they are legit, but so far, I feel very far from being convinced.
Janethjack
10 years ago,
Registered user
why to lose at all the control of our money? Actually for me it represents the most attractive fact offered by this market, I can trade there myself then I control my capital. Why don’t take advantages of these possibilities? If don’t, it could be better investing in parallel markets
Alan Forsyth
10 years ago,
Registered user
Recommended Managed Forex accounts for Uk investors?

Hi,

Am based in UK - can anyone recommend a good manager based in UK? Am keen to invest in managed account.


Alan
bobbywhite
10 years ago,
Registered user
Answer to Alan and Pharaon can you give feedback?

Alan,

I joined through a new internet friend in December the by now 1 year old British forex managed account fx-interest.com as member bobbywhite (FX-Interest.com/index.php) who just reviewed its return rates from 0,6% daily up to 400% annually. Pharaon, I just read your post here and would like to know if this is good. I tested with small investment amounts to invest and retrieved already a small amount via alertpay. My friend just upgraded his investment to 10,000 $ to profit from the 32% monthly plan. He is with them since 6 months now but didn't retrieve large amounts. He accumulated them so far. I am also learning through myprivatetrade.com to trade for myself. I started last week on a demo account the trendspotting strategy and it works relatively fine for now (8 winners against 3 losers). I think this is the best way. i only need to check daily for 15 minutes on the 4 major currencypairs.

Thanks for feedback
Pharaoh
10 years ago,
Registered user
Sorry Alan, I'm watching a couple of account managers with some interest, but they are all on this side of the Atlantic.

Bobby, that's a HYIP. It might pay now, but at some point, all the money will disappear. Read this:


https://www.forexpeacearmy.com/r/pharaoh-forex-blog/648/ponzi-schemes-and-hyips-free-money-traps
wizardt
10 years ago,
Registered user
im a trade accont manager

ok first off im new to trading only been doing it live for three months.

but here are my rules would appreciate any advice on these.

1. i only use a true ecn broker. they only require a 400 dollar minimum to open an account. i also recieve nothing from the broker for having people open an account with them for me to trade.
2. i ask for 30% of the monthly growth so at the end of the month the new watermark is drawn.
3. since i dont have to request from the client my commission the broker does it automatically. so i play by their watermark rules.
4. i tell my clients that if i draw down there account by 50% im doing something wrong and i will deactivate the account until i can prove i have fixed my method.
5. i also do not allow the traders to go above 3% on trades i set the mod per trade and that is where it stays i wont risk more thats that.
6. i have had ok weeks and then good weeks and also bad weeks but am up for the past three months.
i keep a very accurate log that am more than happy to show anyone who wants to see it.
7. when they ask me for my growth percentage i say i hope to get about 10-15% monthly. if i do better one month great it is gravy but i dont want to be held to higher than that.
8. i tell them if i lose 40 pips in a session i am done for the session.
9. if i lose 100 pips then i am done for the day.
10.as for wins i work two sessions per day with a target of 60 pips per session if i hit it im done for the day
11. my weekly goal is 300 pips for the week. every thing above that is gravy
12. i give them my yahoo instant messenger id and i usually keep it on while i am trading. so they can live chat with me at the same time.
13. i recommend to them that when i have 100% thier account they should withdraw 50% of their initial investment and when i 150% a second time they should withdraw the other. this may make for slower compounding but i believe it is better to put that money in an ira or something else. for future use.
these are my rules i use i do not go out and solicit accounts they have come to me and i have agreed to do it but they must first accept my rules. is there anything im missing or should add something im forgetting or do not know about yet.
Kenneth Kiely
10 years ago,
Registered user
I actually started that way. I had no clue what forex trading is all about and just wanted to invest some money in an interesting investment opportunity. That's how I came across managed forex accounts as described at in a Forex blog at my university and decided to invest in one. I knew that there was a fee for the banker and that it's not the safest investment alternative but I was too curious to see how the value of the account would develop. I probably had a clever account manager since I made some profit.
mike boyer
10 years ago,
Registered user
Turn Off


Website is full of typos and grammatical errors. Surely a company with over 5 years experience and millions of dollars under management could pay someone a few hundred bucks to fix this.


Yes,. company running through large money and to show somewhat complete legitimacy is not going to contain any typo errors. Agree with Pharaoh. To me this is a turn off.
mike boyer
10 years ago,
Registered user
50% Drawdown

> ok first off im new to trading only been doing it live for three months.


Yes,. Sounds like a plan! although after briefly glancing through this I felt the 50% drawdown then deactivate---The 50% seems a significant "too high" then again this depends on several factors. For example here is two: The ammount of time the draw down occured. A day? A week? A Month? A Year?????? This time frame is a big deal and a must for those to understand. Another example is if you grew $30,000. into $280,000 over a 3 year period then over the next (3) months had a draw down, A -50% to $180,000 then deactivated, I feel that your clientels chances of staying on board at that point may be 50/50. I feel that the basic rules above are good but need to be further segmented to their highest degree of complexity for you will find that clientel will come up with the most unusual and odd ball subjects and they become complex themselves with your rueling. In other words a discrete explination of terms and phrases broken down into several subset for each rule where you feel is necessary. Set op your own "By Laws", Terms and Phrases, Extreme explination of each rule followed up with examples etc,etc. This would be for your own protection as well as theirs and to dimish any (down the road) misunderstandings,lawsuits,neglect etc,etc. Have that reviewed by a lawyer for his verification. Remember that anything you do not mention within your guidelines listed above if not enhanced to the extreme may be used against you even if you feel all is going well or not.... Hope this helps.
vincentw
10 years ago,
Registered user
Managed Account

Hi,
Firstly, thanks to all the info. provided by everyone, especially the administrators.

I have a managerd account at Prime4x - they're in Cyprus.

I'm British, living in New Zealand - i did visit them 6 months ago and they seemed like professional people.

At the moment i have my interest sent back home each month, which is 5% of my account.

I receive a statement each month, but i don't see the trades placed - pparently they earn 30%.

i only plan to keep my money with them for another few months (don't want to push my luck) -i do have a largeish amount with them.

I read all the warnings posted and i know they're in Cyprus only regulated by local laws (which does worry me) if anyone has heard anything negative, or has an account with them - i would like to hear. i do internet searches on them everyday, and nothing bad (except one person moaning about them losing on some commission or something - you always get one fruitcake) nothing negative so far.

Cheers,
vincent
Johnfa
10 years ago,
Registered user
>

At the moment i have my interest sent back home each month, which is 5% of my account.

I receive a statement each month, but i don't see the trades placed - pparently they earn 30%.

i only p..

Hi vincent,

Did you try to withdraw all account any time ?

How do you thing they paid you 5%/month from... your money ?

If they are reading this thread or they know your plan to keep your money with them for another few months, do you think you will never contact them again ?

Hope all right with you because this broker is not well know on forex market.

Good luck to you !
vans22
10 years ago,
Registered user
How Not To Lose All Your Money With A Managed Forex Account
by Pharaoh



Managed forex accounts present a decent opportunity for those who don’t have the time to learn how to trade forex or en..

:D:D
thank you for this post again Pharaoh. I really aprreciate this things that you are doing , all this advises and warnings..I know that what you're doing is time consuming , we can't thank you enough. I'm starting to become a fan of yours !he he he .More Power!
elah024
10 years ago,
Registered user
yes i thought of that also. what he did in all his posts is time consuming and it helps, really. it's also time consuming for the readers...:err:
Pharaoh
10 years ago,
Registered user
> yes i thought of that also. what he did in all his posts is time consuming and it helps, really. it's also time consuming for the readers...:err:

I specialize in being thorough, not in being concise. :p
elah024
10 years ago,
Registered user
> I specialize in being thorough, not in being concise. :p

oh yes i can see that. but it helps anyway.how come you made all those? i mean are you guru of this or what? how long have you been doing this?:confused:
Pharaoh
10 years ago,
Registered user
> i mean are you guru of this or what? how long have you been doing this?

Define "this". :p

Trading? Since I was about 6. (A close relative worked for a major brokerage firm when I was a kid.)

Forex? Only since 2007. Having a background in stock trading helped - some.

Teaching? Forever. Just about every job I've had involved some sort of teaching or training, either of my clients or coworkers. I've also taught in schools in the USA and overseas. I've had classes teaching 2nd graders. I've had classes teaching a College dean and along with MDs and PhDs. I've taught poor factory workers and rich factory owners. Some of my ancestors were teachers, so I guess it's genetic.

Scam busting online? Since 1993 or 94. Started as soon as I got access to online newsgroups. I always did the netcop thing in a few select newsgroups and wrecked the day (and the internet accounts) of a lot of idiots posting "Make Money Fast" pyramid schemes. Later, I started hunting 419-type scammers. I shut down thousands of their accounts and sent warnings to anyone who was in communication with them.


Getting back to the primary topic of this thread - part of learning is the same as part of avoiding getting scammed. You have to examine new information and see if it makes sense to you. If it doesn't, ask questions and make sure you get good answers. If a teacher gives you bogus answers, it's probably because he/she doesn't want to admit a gap in knowledge. If a company gives you bogus answers, it's probably because they plan something bad for your bank account.
Eric Alyea
10 years ago,
Registered user
Dancing the web & matrix

Give me a hint, how do you keep up with not only all the posts here but on the other sites I know you monitor.
Since my Dad was an Anesthesiologist, does that explain why I don't leave people in pain? That's a joke but true.;)
Pharaoh
10 years ago,
Registered user
Since the FPA is kind of my personal educational playground, I check some of the more interesting folders first everytime I login. I also usually sweep through the other forum areas to see if there's anything interesting.

I'm a member of a few other forums. For those, I keep subscribed to a few threads I find interesting and occasionally drop in a reply.

If the AsstMod or a Scam Investigator asks for more info on a company, then I'll go on an internet scavenger hunt for them. Some of the linkages between companies are very intriguing.

As in war, detecting and avoiding scams can easily be summed up by a statement by Sun Tzu in his work, The Art of War:


“Time spent in reconnaissance is seldom wasted.”


(Note that this statement and variations of it have been credited to a number of famous military leaders over the years. The original book was written well over 2000 years ago and became popular in military academies around the world in the last couple of hundred years, thus leading to quite a few generals repeating Sun Tzu's advice and getting credit for it.)

So many people are desperate to jump to the newest broker, newest software, or newest account manager. If you don't take the time to do some basic research before handing over your money, the odds of getting scammed go up 100 fold.
elah024
10 years ago,
Registered user
> Define "this". :p



:eek:oh::eek:oh: you've been doing this for a long time already, right? now thats what guru means..wow.. you've been through a lot. continue helping others. anyway, why would people think of getting money from others where in fact people keep on telling that forex trading is the easiest way on making real money for forex is the biggest stock trading exsisting now days? :confused:
ALVIN
9 years ago,
Registered user
I walk along....

Hello everybody.. Yeah...nice story...Very nice. Right now i'm looking nice account manager too although right now i managed people account with scalping trading mode. As far as i see this: forexamf.com - promised ROI 100%in one month. Can someone give a comment/experience with this FX acc manager?? Thank you
Pharaoh
9 years ago,
Registered user
100% in a month is possible, but only by taking extreme risks. I see on the site that he only wants your account number and password. That means no LPOA and no contract. If he crashes your account, you are out of luck. If he makes money for you, your broker may have the legal right to cancel the trades.

Someone like this could easily trade two accounts in opposite directions with extreme risk. One client makes a lot of money and pays high performance fees (before a possible cancellation of trades by the broker). The other gets a margin call.

Never use any account manager without an LPOA in place and a contract specifying risk levels.
rajendransg
9 years ago,
Registered user
Dear Pharoah,
Thanks for the informative article. I am Rajendran from India. Your article was precise and informative. We Indians came to know a lot from your article about ' managed accounts '. Keep it up!. My thanks to FPA for doing great service to humans.
All the best S G Rajendran
K.UTHIRAPATHY
9 years ago,
Registered user
Dear Sir,

During the period of 1990 I started the concept of Mutual Funds in India and slowly that has now become the largest investment in India.Now I wanted to study the foreign exchange system and its working and for this purpose I was browsing several websites and find this website to be extremely usuful and note worthy.I thank the team who have painstakingly done the research and have come up with the article.Kindly convey my felicitations to the team for their excellent work.

K.UTHIRAPATHY
Adan Lopez Lacayo
9 years ago,
Registered user
Hello Pharaoh,

Have you checked out Payday Forex? What is your personal opinion on them?
Pharaoh
9 years ago,
Registered user
Looks like they want to be everything to everybody - rebate IB, signals, managed, etc.

They're managed performance doesn't come with trading logs. I'd want to have investor access to one of their live accounts, both to verify the returns they claim as well as to see what sort of risks they are taking to get those returns and the max drawdown at any one time.

Remember, it's not the promised rate of return that should be your primary focus. 100% a year would be nice, but won't mean much if you get a margin call in month 11 of that year. Any LPOA should include IRONCLAD rules regarding maximum risk and maximum drawdowns.
centron
9 years ago,
Registered user
New Money Manager, well-used trader...

Thank you Pharaoh for the well-rounded education on money managers.
It has helped me immensely in thinking about how to best approach the idea of managing other people's money.

I have been trading for 6+ years, winning some and losing some and reading as much as my brain could take in. I have worked through countless systems, building countless systems using the best from the best. One of the most important things that I have learned is that no matter how good the system is, if you can't make it fit into who you are, (your psyche, your time spent trading, etc.,) you might as well not use the system. That's when I started to make some breakthroughs when thinking about systems.

I, like many others here, wish to be free financially, and free from a job I do not like and that also pushes me forward and drives me to learn more and more.

A little convoluted so far but I'm getting to the point where all this history brought me to my system. It has taken hundreds of hours sitting in front of the computer, many, many times trying to persuade my wife to be a little more patient.

I am more than a little nervous because there may be those that will say I am a liar and a scammer. But I am at the point now where I am ready to take the chance because I really believe that I have created a solid system.

I will provide the stats and should people be interested you can direct me to whatever area of the site I need to be in to address questions.

I hope I am in the right area as I do not wish to be seen as a scammer with my first post:embarrassed:

I have paper traded bar by bar, 479 weeks of data from April 2001 to July 2010. My system generated 45 pips per week, every week except three weeks (1 week no trade, 1 week double stoploss 75X2, 1 week single stoploss 75pips). Drawdown never hit 10%.

Now does this guarantee anything, yes and no, I leave it up to you to decide.

Comments?
Pharaoh
9 years ago,
Registered user
My first advice before you take the leap into becoming an account manager is that you go from paper trading to testing this on a small live account. From your description, it sounds more like you were backtesting, so you may even want to spend some time forward testing on a demo account before shifting to live.

If it works out ok on a live account, then you need to see if Canada requires you to get some sort of license before offering services to trade other people's money.

Once all of the above is done, get yourself a website. Post both your backtested results and your forward tested results. You'll need to figure out what sort of compensation you want, what brokers you are willing to work with, and the exact wording of the LPOA you want clients to sign. You can also stick an ad in the FPA's classifieds and volunteer for the FPA's Performance Testing Program.
centron
9 years ago,
Registered user
Thanks

Hey Pharaoh,

Thanks for the pointers. I will start trading live this upcoming week. I will also look into how the FPA's performance testing works.

Thanks for the great work you're doing here.

Cheers
centron
9 years ago,
Registered user
Performance review

Hey Pharaoh,

How does one go about setting up a performance review of their system?
I'll be honest, I'm more than a little paranoid about posting too much info but I'm sure something can be worked out.

Thanks again.
Pharaoh
9 years ago,
Registered user
Everything needed for an FPA Performance Test is listed here:


www.forexpeacearmy.com/community/threads/how-to-volunteer-your-product-or-service-for-fpa-performance-testing.8077


You're also going to need to determine how big of a cut you want from profits. If you ask for too much and don't have an amazing track record, people won't sign up. If you ask for too little, you might not make enough to make it worth the effort.
PipInvestment
8 years ago,
Registered user
Finding account managers with Live accounts linked to Myfxbook is an honest way to verify the track record, trading activity, Drawdown, Live account with real money, and to make sure they trade with an honest broker.

I've came across some good traders with great statistics to only find out that they are trading with some broker that no one has ever heard of. Also avoid any trader that hides their Broker as well.

There should not be anything to hide, if the manager is legit.
Chaz McHan
8 years ago,
Registered user
Pip Investor, Pharaoh:

I am a portfolio manager and plan to submit all my records from here forward with the managed account monitoring section of FPA. Does myFXbook offer a similar service? Even though I am not trying to recruit clients (I have my own internal mechanisms and external partnerships for that), I have nothing to hide... I believe in transparency.
Pharaoh
8 years ago,
Registered user
I haven't checked out FxBook or some of the other MT4 publishing sites. I'm suspicious that some may be subject to having info doctored before being uploaded.

Any site that pulls all the account info directly from MT4 using an investor password would be good. The FPA does this and I think some other sites also do it. Be careful. Even if they do pull straight from MT4, many sites all the account owner to hide information that could be important to a potential investor.
Jeeva Suriyaa
8 years ago,
Registered user
This is a good article btw,with proper MM also we can safe from the grasp of losing
Zubair Ahmad
8 years ago,
Registered user
Well Done Pharaoh,

Comprehensive and informative learning. Thanks for the post.

Regards
Zubair
FXCO
8 years ago,
Registered user
Thanks for the article
cliffv
8 years ago,
Registered user
good advice

thanks for the info, did not realize brokers paid out finder fees , with IBs and such. Your detailed caution statement from earlier on this link was well written.
m1refaat
8 years ago,
Registered user
Hello,
I want to ask -In other words what is the best-
is it the best to manage the account by myself or let some one manage it for me?
Pharaoh
8 years ago,
Registered user
If you have the time to learn forex you should. That will give you the choice of trading for yourself or using an account manager - or both. It will also give you a much better idea of when an account manager is just making up excuses to cover incompetence or worse.

Don't believe any account manager offering great rates of return while promising no risk. There is no such thing as "no risk" in the forex market.

Read the article on page 1 of this thread and some of the other articles in this folder to give yourself a much better chance of avoiding getting scammed. Those articles will also help you in finding brokers, forex products, and account managers who won't scam you.
tmprojects
8 years ago,
Registered user
Thank you

Pharaoh,

i have been to many sites and been mislead by an equal amount.

The time and skill you have invested (with, most importantly, nothing asked in return) in giving us novices advice, has not gone unnoticed.

you have taught me how much i don't know. and the most important things i should. and for that i thank you.
RahmanSL
8 years ago,
Registered user
Yes, the Son-of-Ra'a (Pharaoh) tells it like it is and for what it is.

P/S: And I am 100% certain he can make a killing in commissions if he would consider recommending Forex Brokers or become a Broker's IB to Newbies : )
forexSQ
8 years ago,
Registered user
Most of forex account managers are broker affiliates because they dont know how to trade , but some companies really trade with safe risk
Pharaoh
8 years ago,
Registered user
> Yes, the Son-of-Ra'a (Pharaoh) tells it like it is and for what it is.

P/S: And I am 100% certain he can make a killing in commissions if he would consider recommending Forex Brokers or become a Br..

Yeah, but have you read the fine print of those contracts to become an IB? The part about giving up the rights to one's immortal soul is a little worrisome.
:p
RahmanSL
8 years ago,
Registered user
> Yeah, but have you read the fine print of those contracts to become an IB? The part about giving up the rights to one's immortal soul is a little worrisome.
:p

Hmmm, so you did considered that option and have read those fine prints. : )

Immortal soul???...I thought your High Priest takes care of that for you, oh Son-of-Ra'a! : )
athenafx
8 years ago,
Registered user
For choosing an account manager, you also have to take into consideration the %return / % deviation.

A professional trader has to keep this number as high as possible and it is very difficult because the goal is to get the best return with the smallest deviation.

For example :

Trader#1 15% return and 30% deviation = 0.5

Trader#2 10% return with 2% deviation = 5

So trader#1 is dangerous and trader#2 is clearly better.

You should also think that there are stats about the size of managed accounts.

For example 300k is a pretty common size because large institutions and money managers know that it is too expensive to manage small accounts.

It means that if you find people ready to manage 1k accounts, you should stay away because most of the time it will be a scam or incompetent traders.
Pharaoh
8 years ago,
Registered user
Back in the day when account managers placed trades for individual accounts one at a time, I'd have agreed that anyone running small accounts should be given a much higher level of screening.

On the other hand, current forex trading technology allows for an account manager to place trades in multiple accounts simultaneously. Setup for this only requires a cooperative broker and an LPOA. High water mark percent of profit is automatically transferred to the account manager.

I'd wonder about an account manager who would take a $100 account, but wouldn't consider someone taking $5000 accounts to be any more suspicious than an account manager with a $50,000 or $500,000 minimum. What you want is to see LIVE trading results first. Anyone who won't let you take a look at at least one live account using investor access on the weekend very likely has something to hide.
RahmanSL
8 years ago,
Registered user
"Anyone who won't let you take a look at at least one live account using investor access on the weekend very likely has something to hide."

If anyone take a look at one of my three Live accounts, he/she would be horrified.
Hmmmmm...wonder if he/she would still consider me as a fund/account manager!
Better to let he/she have a look at one of my beautiful, lovely, and wondrous Demo accounts.
athenafx
8 years ago,
Registered user
Yes, Pharaoh you are right. Current technology allows to use PAM or MAM accounts. But what about the admin cost ?

We are going to imagine that someone named John is a money manager. John manages $2,000,000. However, the average account size is 2k.

John has probably from 500 to 1000 customers. We are in the real word so let's say that John made +20% return for the whole year.

John has created $400,000 profit and received 25% as a performance fee.

John earned $100,000 but this is not enough.

John needs a full time employee + office + real data feed and so on.

John also has to pay for many other things such as audit, regulation, accounting.

John is very busy trading and replying to the emails of his customers.
He also knows that he has to arrange a one to one meeting (at least once a year) with each customer. His employee is very busy too (taxes, invoices, ...). A monthly invoice for around 500 customers targets 6000 invoices a year.


One might say that john needs more customers. The answer is no. John needs more money to manage not more customers.

The conclusion is that this "john" cannot exist. It is not a coincidence if you can't find professional money managers accepting small accounts.
Pharaoh
8 years ago,
Registered user
Obviously it's less work and more profitable to manage the same amount of money on fewer, larger accounts. "John" would prefer to manage a smaller number of large accounts, but you are saddling him with many unnecessary burdens.

A person with a $2k account is not going to expect a yearly face-to-face meeting. A person with a $2k account might never even get a yearly phone call. The assistant's job would be to handle all the day-to-day silly questions that will come in by email, to screen potential clients, and possibly even to sell the service to potential clients. It would be simple for John to outsource accounting and taxes for very reasonable rates.

A proper contract with the brokers and LPOAs should result in no need for invoices. The amounts will be calculated on the broker end and automatically be transferred to John's accounts. If he's smart, he'll double-check these (or make his assistant do it). Then again, if he's got 2 or more accounts with the same broker and the same opening balance, he only needs to check one of them and then make sure that what he gets on the others is the same, plus or minus a few cents.

Many account managers are in offshore jurisdictions. This often results in far less regulatory expense. It also means that other expenses are lower. Personally, I'd prefer a regulated account manager and would expect higher fees and/or a larger minimum balance from a regulated one, but would get very nervous if any potential account manager started justifying high fees or high minimum opening balances with a long list of expenses that weren't all justifiable.

On the other hand, I'm not going to have more confidence in an account manager just because he's got a large minimum balance. It doesn't take any longer to margin call a $1 million dollar account than it does to get a margin call on a $10,000 account, but the financial damage is 100 times greater.
jezrp
8 years ago,
Registered user
is it not possible for people to post what managed accounts they are using , what broker they are using and their opinion. This way we'd be able get first hand and current information about them ?
Pharaoh
8 years ago,
Registered user
The FPA tries to keep education and general discussions separate from anyone endorsing products. Otherwise, even a simple question about moving averages will turn into a bunch of advertisements for EAs and other software.

There are reviews for hundreds of brokers and account managers, each with a link to a discussion thread about the company:


https://www.forexpeacearmy.com/forex-reviews


There's also a special thread just for people to tell about how much they like their brokerage:


https://www.forexpeacearmy.com/community/threads/so-are-there-any-brokers-anyone-likes.11411/


If you want to set up a similar thread for account managers, then Company Comparisons folder would be the place to do it.


https://www.forexpeacearmy.com/community/forums/forex-company-comparisons.127/


No matter where you see it, if some brand new forums account is created just to push some company, don't trust it. Look for people who have been around for awhile and who have made some sort of effort to help other traders instead of only trying to sell you something.
palstec
8 years ago,
Registered user
hello pharaoh,
can you please tell me what do think about this company
fx-investment-institute.com
they offer managed account since nov 2009 , i have good experience with them since march 2010, that means very good performance, good support and no problems to withdraw my funds.
MichelAnge21
8 years ago,
Registered user
Let me think about it for 2 minutes. Hmmmm, it s not impossible that some of those online offers to manage small accounts are from legit and competent managers.

After all, I once went to the circus and I saw with my own eyes a bear in a ballerina tutu who could ride a bicycle.

Now, most bears are only ordinary bears of course: they are only interested in getting their nose into the honey pot without too much efforts.

My gut feeling tells me that most of those companies who offer to manage small accounts simply plug some kind of stupid EA to your account and that s it.

There are even bears who, like Yogi Bear, will steal your picnic and disappear.

Because, if their operations are not automated, I can figure out in my mind, many fraudulent schemes to extract money from their clients. As Pharaoh pointed out in a past post, one strategy could be to divide clients in two groups and take crazy risks in opposite directions to maximize return for 50% of the clients. Those 50% will be happy to pay the percentage. And that is merely one possibility among many.
Pharaoh
8 years ago,
Registered user
Multiple warning flags for fx-investment-institute.com.

Their bank is in Saint Vincent and the Grenadines, but their HQ claims to be in Panama. The address is the same as used by the scammers at Panamoney and appears to be a virtual office.

It looks like a pooled investment of some sort.

No trace of proof of returns. Anyone can stick any percentage gain they like on a website.

I'd say that there's a significant chance that this is a Ponzi scheme of some sort. It may pay for awhile, but then it could disappear in an instant.
MichelAnge21
8 years ago,
Registered user
Panama ? Did I correctly read ? You said Panama ?

Nobody in his right mind does any kind of Forex business with a company in Panama.

Not only Forex is not regulated in Panama, but the panamean Laws still allow anonymous corporations and you cant even know who the shareholders are.

On top of that, Panama is a country where the politicians themselves are scammers.
acaignar
8 years ago,
Registered user
Dear all,

I am interesting in finding a good and trustful account manager. I read your post, especially the very first one of Pharaoh which I thank for it. So far, the best offer I found on the web is this one: profxcapital.com

I'm here to get your feedback so do not hesitate!

For info, I already asked them some questions and they were very quick in answering. Here it is:


Me: Can you provide me an account investor password so I can check your daily trades with FinFx?
Profx: Is this a request to an account to view trades? We do not allow this. The reason being that clients can copy trades.
If it is a question around your own trading account. You can view all trades on your FinFX account through the investor access to your account.

Me: Do you need the account to be ECN or a normal account with FinFx is fine? I am asking you because the minimum investment with FinFx if I go for an ECN is $2.500 not $2.000.
Profx: Normal account is fine. The LPOA means that you will have the correct account either way.

Me: Last but not least, sorry to ask that but what is the difference between your company/offer and other serious concurrents such as forexmanaged.co.uk? In other words, what is your added value compare to your concurrent?
Profx: There are differences.
1) Firstly the minimum account size is significantly difference (US$10,000 for majority of other companies).
2) Secondly, our fee is performance fee is 25%, this is also significantly less than other managed account providers (some cases up to 35%).


Thank you in advance for your comments guys :)
Cheers,
Alex
Pharaoh
8 years ago,
Registered user
I'd say the "you could copy our trades" excuse profxcapital.com gave you about not showing you that so-called live account they brag about is BS.

They could let you have investor access on a weekend and change the password before the market opens.

They also want you to open an account via their IB links. This means that they make money even if you don't. An account manager who is also an IB is an open invitation to churning.

These two factors are enough that I'd never consider opening an account with them.
acaignar
8 years ago,
Registered user
Hi,

Thank you very much for your feedback. I will come back to them with your remarks (if you don't mind of course).
Regarding the account opening via their link, I'm not sure it is compulsory but I will make sure by asking them again.

The "serious alternative" from my point of view that I found on internet is this one: forexmanaged.co.uk
I will try to dig in later on. If you have some info I'll be glad to hear.

Regards,
Alex
Pharaoh
8 years ago,
Registered user
They take their fee from the high water mark and require an LPOA. That part is good.

Then there's everything else.

They claim 3rd party auditing. If you want to see the audits, you have to request them by email. They say that their auditor is Clifton D. Bodiford. I found another of his audits for a different company online. In that one he says he inspected the company's schedule of investment returns, but that the company's management was responsible for the schedule of investment returns. This seems to me to say "I looked at what they showed me." instead of "I verified with the broker that these trades really took place and represent what happened to real investors."

The only real way to be sure of how a managed accounts company performs is to access live trading records via the investor password or even the full password on a weekend when the market is closed.

They claim 10 years experience in the video popup. The website was first registered in March 2010 and shows results back to the beginning of 2009.

I love the part about them not being UK based and having to use the .uk in the URL since nothing else was available. Looks like they skipped .biz and didn't look at alternative names that would have been available with a .com extension. Their domain was really registered from Thailand.

I checked the signup. They don't accept clients from Thailand.

They use the same BS tactic to try to make gullible people think they've been featured in the press you see on a lot of cheap EAs. The right hand side of the website lists a bunch of major news services. Under the company name in smaller type, it says "Forex has been seen in:"

It looks like they make you sign up for a new account when you sign up with them. I'm not going to enter all my info to get that far in the signup process, but the usual tactic in this case is to have you sign up through the account management company's IB link. This would give them a cut of all trades even when they are losing money.

Their contact page lists what is likely a virtual office in the Seychelles.

It would take a considerable amount of proof of success to convince me to even think about risking any money with this company.
acaignar
8 years ago,
Registered user
Oh man you are such a forex managed account killer! ;)

Of course you are so right regarding forexmanaged.co.uk, and it also seems you were right regarding the other one profxcapital.com ...
Indeed, as I told you last time, I went back to them with your remarks and here were their answers:

1)
ME: Regarding the account investor password, I understand your point of view as you don't want people to copy your trades in real time. Fine by me.
However, if there is no way to check the open trades (and so to consider your drawdown) then I cannot trust 100% your service. I propose you this deal: please offer me an account investor password at Friday midnight and change it or delete it at Sunday midnight. Like this, I won't be able to copy any of your trades but at least I can have a look of the trades opened during the week-end.
Profx: For more transparency we are now offering the new FinFx managed account here myfxbook.com/members/profxcapital/finfx-tracker/131648
This is what were are offering regarding access to the managed account

2)
ME: Is it compulsory for me to open a broker account via your links OR I can go directly on the broker home page?
Profx: Yes, you must use the links on our site.


... no comments...

I'm really disappointed because I really though it was possible to find a suitable and honest company. But it seems I was wrong... never mind, don't worry be happy! :)

For my own pleasure I answered them the following; let's see if they have something to say!

Thank you for your answers. Now I know that your company cannot be trusted because:

1) Your link with myfxbook doesn't show open trades. As you don't want to allow me to check them at least during one week-end, it means that if I could see them I would be disappointed.

2) If one MUST use your link, it means that you are making money through commissioning even with loosing trades. I would have been interested in your offer only if I could use my own link to receive back commissions from CashBack.

If you disagree with my remarks, please do not hesitate to answer me.


Bottom line, this search seems worthless. But thanks a lot for your help Pharaoh!

Regards,
Alex
Burnet
8 years ago,
Registered user
I’ve been reading with interest this thread. And we only can get one conclusion. The only way for don’t lose our money in a managed account is don’t even try. Because there is not trustable managed account.
If we have a look at the managed account reviews on this forum the one with high starts, most of their comments are more than a year old, including the positives one. And many of the high rated managed account don’t even exist any more. We all have heard some managed account that works and gets profits, but to verify everything they claim seems almost impossible. I haven’t found a managed account that people consider it to be above suspicious.
Why don’t we openly say that managed accounts for small/medium investor is a fantasy?
Why do people keep talking and asking about this of that managed account?
markflint
8 years ago,
Registered user
Alex,

I am 30 years in this business. I have seen many traders and managers. Please believe me, there are profitable and reliable managers. I personally know some of them. I will not mention their names here, not to do an advertisement, but just try to show you direction. All I can say is just they are not listed at this website. I suggest you to have your own mind and your own head.

This question is deeper than you think. Unfortunately, or fortunately, this is not so simple way to detect if manager scam artist or no, like Pharaoh method described here, but I confirm his issue regarding forexmanaged.co.uk. I have experience to test investing with them and do not understand why you decide they are reliable.

Why question not so simple? Just look at few things:

1. No one rating and review web site will provide you objective information. Review websites publish information without any responsibility and never check if information is correct. How you know who is posting there and what is aim? How do you know that post not from competitor or their own? I want to let you know that I tested this. I sent different posts and no one administrator ask me to provide confirmation. Their aim is visitors, advertisement and money. So be careful. Listen just yourself and have your own opinion.

2. Office. It is no reason to have office in the city center for manager. It is enough to have home office. Just imagine if trader works full time. It is much better to work from home. I hope you know why.

3. IB link. It is might be done for broker convenience. Broker might use it just for convenience. It does not mean that broker will pay to the manager. For example, Manager may be registered with NFA as a CTA only, but not as IB. It that case broker (US based) will not be able to pay IB rebate. It is just a simple example for you. There might be other reasons as well.
But if your manager will get IB rebate, it does not mean that your manager scam artist. It depends on trading style. If you manager does 30-100 trades a day, of course it churning. But if your manager has just 3 trades a month and your account is something like $10000, it is nothing. I can say you that sometimes I have just 1 trade a month and still have my 3-4% profit.

4. You have to be ready to pay your manager for his job. Nobody works for you free of charge. Reliable manager will cost you.

Now, about direction. There is just one way to decide if manager is for you – open small account and see how it works. But before you start, you have to ask manager about his risk management strategy and trading style. Risk management is most important for fund manager. Try to find manager with 1% or less risk per trade, better from 0.25% per trade. It is crucial factor. Nobody can trade without loses, it is normal, but most important if your manager keep loses small. We can’t know what profit we will have, but we can control loses. So, if your manager keeps loses small it is fine. Do not hurry up. Forex is not quick money. Your account should grow step by step. Also look at trading statement. If you see a lot of trades a day, avoid. Most likely such a manager does not care about quality but just quantity. Avoid managers who promise you guaranteed profit. Reliable manager just can promise to follow his risk management strategy. Also avoid managers who promise you 10-25% (or more) every month. It is possible just to overleverage trade and will use high risk strategy.
Of course you manage have to provide you with real address and telephone number upon POA.

I hope this will help you.
Pharaoh
8 years ago,
Registered user
Markflint's points are both good and bad.

1. Cross-checking more than one review site is good. Also, read the content of the reviews. Unmoderated review sites will have off-topic reviews on the page, possibly including advertising for competitors. Look for multiple reviews with similar wording. In other words, even with a well run set of reviews like here at the FPA, you can't just look at the overall rating and take it as the final opinion. You MUST use your brain and spend some time doing research.

2. I don't mind if my trader works from his home office. I DO mind if a company or trader I'm dealing with doesn't have a physical address that's not a virtual office. If I'm going to trust someone to handle my money, then I expect that trust to be returned.

3. IB links are for getting a cut of the spread, which may or may not be inflated. It would be silly to go to the effort of creating a "no kickback" IB relationship with a broker when it would take zero effort just to point people to the preferred broker's website.

If your account manager makes you trade via an account created by an IB link, he's getting money out of trades whether you win or lose.

4. Make sure that the pay comes ONLY as a percentage of the high water mark on the account. A good manager is worth his percentage, but should still have to EARN it.

Beware of any set up fees, insurance fees, maintenance fees, etc. All of these are just you giving the account manager or management company money in exchange for nothing at all. The effort of preparing the LPOA for your signature is a cost of business that should be covered by the management side. You should only be paying a percentage of net profits.

As for what constitutes a fair percentage, that's a difficult question. I've seen ranges from 20% up to 50%. I think it would come down to how good and reliable the manager is in the long run.
craig bryan
8 years ago,
Registered user
Ok I'm a little concerned with what I'm seeing,

As an account manager myself,
My clients are advised to deposit no more than $1000 into their own accounts,
trading via lpoa & Prefer them to take profit each month
(can't see the sense in just letting it build up)

Doing it any other way would expose you to a world of financial pain,
& this pool has way to many sharks in it, I advise my clients to only use properly registered & regulated brokers.

I highly recommend FPA as a good starting point for checking scam brokers,

A simple check if you're using MT4 is check the wait state for order processing it should be 0!

have a good one
Chaz McHan
8 years ago,
Registered user
Markups and/or rebates DO NOT necessarily mean that an account is being churned, nor does a high daily trading volume. Churning is the placement of trades merely for the sake of the portion of the spread due the manager/IB. In other words, trading without regard to the profit and/or loss of a particular trade. If the manager experiences some hefty losses, then it would mean that the account is not being churned. Maybe the manager is not very good at what he does. Maybe he is experiencing a bad stretch. One thing is certain, though... he is looking for a loser to turn profitable, misguided or not, for the sake of the health of the client's account. His markup is already secured, so what other reason would he have to let the trade ride? Likewise, if he places 100 trades a day (does anyone really do that many? I average between 3 and 10 daily) and doesn't arbitrarily limit the wins nor close with small pip losses, then he is not churning. There are lots of legitimate reasons why a manager would take a markup. Assuming that he is inclined to churn and burn the account is cynical and unfair to many good managers.
Pharaoh
8 years ago,
Registered user
Markups and/or rebates to your account manager create a definite temptation to churn. Does this mean the manager will churn? Maybe, maybe not. Personally, I'd rather pay a percent or two more off the high water mark than have to sit around worrying if my manager might suddenly decide to place a few hundred useless trades just to rack up some commissions.

Remember, sometimes good account managers turn bad. The FPA reviews have plenty of stories about how well things were going before a good manager's trading style suddenly went bad. I can't think of any legitimate reason to place a temptation to churn in front of any account manager.
Chaz McHan
8 years ago,
Registered user
Markups CAN Incentivize Trader Accountability

First, let me say that I have the utmost respect for you, Pharaoh. I almost always agree with you. More than that, I trust your motivations and sense of honor, even on points where we might disagree. For example, I believe that people giving any advice, making recommendations or giving condemnations of brokers, managers, etc., need to be transparent about their own identity. I am Chaz McHan. I am a portfolio manager with a a couple/few CTAs at any given time, a trader/trading desk manager, and a trainer of traders. I have done it full time for nearly a decade. I have never recruited clients on FPA, Forex Bastards, Baby Pips or any of the other online communities I have participated in, nor have I ever tried to, nor do I plan to, nor do I even do that kind of thing myself, nor ever plan to approve any APs or others working for or with me to do so. Just thought I'd make that clear. ;-)

I have no alternative agenda in making my case on this topic, the counterpoint to your point, other than to make the case.

That being said, I should also say that this is not really much of a disagreement. It is likely -- almost certain -- that if asked to make a general recommendation to the general public about hypothetical managers with whom I am not intimately familiar, that I would give the same advice as you give.

However, I have found it to be fair and expedient in my own organization to have pip markups AND profit sharing above high watermark. And even though we don't currently require a management fee, I'd like to justify this as well on behalf of the good and honorable managers that do charge one. As with your comments, mine are opinion, based on experience. I have operated on several models and have arrived at my current one in reaction to practical considerations, feedback, etc. It might even be tweaked further in the future with future portfolios I might manage.

Regarding Profit Sharing: We are in agreement that ethically speaking, any profit sharing MUST be only of new profits above the high-water mark (AHWM). This practice has become the industry standard, but I did it this way even before that was the case. I was in the minority then, and argued strongly for the rightness and fairness of this method. Like you, I have seen managers require anything between 15% and 50% of the profits AHWM. 15% seems low to me, if one expects a manager to be properly motivated and personally invested in the success of his trading. On the other hand, 50% seems quite high to me. Sure, the manager is investing his time and expertise. But the only thing at risk of depletion is the client's money. 50% of the potential return in exchange for 100% of the potential loss is not right (in my humble opinion). An exception might be for small managers of small client accounts, especially if the manager is an exempt CTA with 1-15 clients who are personal friends and/or family members. I charge 30% of the profits AHWM. This seems to be the sweet spot, where traders are sufficiently incentivized in the success of the trading and clients still end up with the lion's share of the profits made on their accounts.

Regarding markups and rebates: I believe, like you, that traders should not benefit directly or significantly from markups. Management companies, however, often have more than just traders on staff. For example, my company has APs, appointment setters, compliance officer, accountant, etc. It does not make sense to have an AP, whose job is to recruit investment dollars, have his compensation entirely dependent on the performance of the traders. Imagine a situation where there is a significant drawdown in trading, which takes 2 months to recover from. There would be no income at all for any staff member until after the 4th month (one month of losses, 2 months of recovery, fourth month to earn new profits AHWM). The traders, for their part, would have to suck it up, outside possibly a minimal draw from the company. The rest should not be penalized directly. They're doing their jobs. Also, because the rest are not penalized, they can assert the necessary controls and accountability to the traders for a careful risk-mitigation-oriented recovery plan. Imagine a situation where everyone's livelihood is put on hold for those four months UNLESS the high water mark is recovered immediately. This puts the temptation to trade aggressively and possibly even wrecklessly on the traders from the traders themselves, the clients and even those to whom the traders are answerable and accountable within the organization! This is a recipe for disaster. We charge a two pip markup, which is, admittedly, higher than most. In addition, we benefit from a single pip rebate from the brokerage. In exchange, there are some guarantees made to the clients. Namely, if we do not meet our minimum published monthly NET TO CLIENT profit goals in a given month, then we return to the client the equivalent of the ENTIRE spread (not just our markup) on every trade which contributed to the shortfall. That is, on every losing trade. (note: There is no guarantee given or implied that we will make our minimum goal every month, just a guarantee that we will provide some level of remedy if we fail to do so.) Furthermore, we use a trading strategy that specifically is designed to mitigate any negative effect the markups would have to the clients. For example, we do not enter positions that we intend to scalp for 5-10 pips. Rather, we only enter positions that we expect to net at least 10 times the total spread to the clients (which might or might not work out that way by the time the trade is closed). Furthermore, we set the stop-losses tighter by at least the spread amount than many would consider an acceptable loss. This means that we need to be even pickier of our entrances and exits, do even more robust analysis, be even more patient, and be even less tolerant of market risk factors.

Regarding a 1%-3% yearly management fee (paid monthly): I don't fault companies who charge this. Like I said, certain people have to be paid whether the traders are slumping or not. The lights have to stay on, as it were. Besides, it's always something that can be waived or rebated back to the client. It provides the managers with some leverage. In our case, however, we consider it superfluous, since we are already charging markups on the trades.

The real litmus test should be the proof in the pudding, however. What is the client getting? Is he netting 5% monthly from a manager who is taking 50% of the profits and not charging markups? Losing money with a manager who is taking 20% of nothing because they are below the high water mark? Making a net-to-client profit average of 10-12% with a manager that is compensated like my company is, with profit sharing and markups? Making a steady 2% per month from a manager who charges a 3% management fee? In short, the real MAIN question that needs to be asked is, "What is the manager's NET TO CLIENT performance?" Next, "What kind of risk management and accountability does the manager have in place?" Along those same lines, "What kind of volatility does the account experience under this manager? How wide are the swings?"

That's my take on the issue.
Chaz McHan
8 years ago,
Registered user
> Markups and/or rebates to your account manager create a definite temptation to churn. Does this mean the manager will churn? Maybe, maybe not. Personally, I'd rather pay a percent or two more off t..

One more point. Let's not confuse good/bad in terms of competence with good/bad in terms of ethics. An unethical trader might get lucky or be skillful enough to score the client some profits one month and churn their account the next. A competent trader has no excuse to be unethical, if they are good enough, but it could happen. An ethical trader, on the other hand, would never churn a client's account, regardless of his level of competency or his current degree of success or failure. It's the equivalent of stealing. Maybe I have too much faith in the extent of good possessed by a man or woman of principle. I want to be that way, and I make the assumption that others are that way. Not all are, to be sure... but some. Therefore, I'd argue against a "good" trader turning "bad." A lucky one can turn unlucky. I've been both. A competent one can make some bone-headed mistakes on occasion. I have. Principles are part of a person's identity, however, and I don't see them turning off and on like a strobe light.
Pharaoh
8 years ago,
Registered user
Hi Chaz,

I do respect your opinions and agree with almost everything you say on other subjects. I do have a few points to make on this topic.

The number of cases of "good" managers later turning bad is huge. Enabling a method for profit to the manager while the client suffers losses is creating a risk that's not truly necessary.

I do like that your firm returns not just the company's cut of the spread, but the entire spread for unprofitable months. I also understand that a large firm has overhead. Still, I see 3 issues for this. 1. There are a lot of tiny little management "companies" that are really just one person pretending to have a large staff. 2. Your company uses that spread rebate for overhead. There are other companies of various sizes where the manager trading the account may be collecting a percent of that spread rebate as part of the manager's salary, thus making more trades equal more pay. 3. How many managed account companies are there that made promises about returning anything after a bad month and never did? I've seen you around enough to have a reasonable degree of trust in you, but I've read the sad tales of too many clients who were made promises by other companies that were never kept.

I agree that 15% of the high water mark is strangely low and that 50% is too high (unless results are consistently phenomenal). Still, if I had to chose between 2 companies that were equal in ALL other ways and one charged 30% plus collected part of the spread on each trade and the other charged 32% and didn't, I'd pay the 32%.

As for an annual fee of 1-3% - I could see that, but not collected monthly. I'd say quarterly (or annually), and ONLY at the end of a successful quarter (or year) of trading. Even then, I'd still be happier just paying an extra percent or two of profits rather than a percent of my total balance. After all, it doesn't cost a company 10 times as much to trade 10 lots on a large account than it costs to trade 1 lot on a smaller account. It also doesn't cost more if someone with a large account asks for lot size to be kept smaller than usual.

I can see some reasons for a large, safe, well established and well regulated management company to want an annual fee and/or part of the spread. On the other hand, I would still feel much safer if 100% of my costs came directly out of profits alone with nothing touching my initial investment (other than market risk) and no possible hint of any incentive for the manager or management company to churn my account.

If I were providing advice for people who wanted millions of dollars managed and were selecting from established firms with offices, membership in the local chamber of commerce, 20+ year verifiable histories, etc., my advice might be a little different. Instead, the typical person looking for advice here wants to get $5000-$50,000 under management. Many of these readers aren't skilled in checking out a company and won't easily be able to tell a real investment house in London, Paris, New York, or Zurich from a company that's not really located anywhere. Eliminating any possible incentive to churn will remove far more bad companies than good companies from consideration.
AsstModerator
8 years ago,
Registered user
If you two want a steel cage match, I can arrange it. :)
RahmanSL
8 years ago,
Registered user
...and I want the concession for selling pop corn, hot dogs, and drinks...with bookies on the side!:p
VermeirJ
8 years ago,
Registered user
Hi Pharaoh,

very interesting article here.
I'm looking for a managed account myself. I would very much appreciate it if you took a look at forex-managed-accounts.net/Accounts_Info.html and gave some comment on the reliability of the multigains and elite growth accounts. (There might be a login/password needed to view the details. login = dollar, password = dollar).

I'm interested in the Multigains account since it only has a profit share above high water mark and has higher average net gains. The elite growth account has a longer track record but also has a performance fee per lot traded (and there was 25% drawdown during 1 month). Both accounts only offer an investor password that show results for the last two/three months. They only show broker statements for the months before; I wonder if those statements should be trusted?

Chaz: you seem to be an honest guy. If possible, I would like to see some info on the account management company that you work for. You can contact me through pm if you read this.

Keep up the good work here.

Thank you.
Pharaoh
8 years ago,
Registered user
I find it very odd that they don't name their brokers upfront.

The most recent trades look like they have TP, but no hard SL. If the account manager steps away from the screen at the wrong moment or loses internet connectivity at the wrong moment, very bad things could happen to your account balance.
VermeirJ
7 years ago,
Registered user
> I find it very odd that they don't name their brokers upfront.

The most recent trades look like they have TP, but no hard SL. If the account manager steps away from the screen at the wrong moment or..

Hi again.

thanks for the reply. Appreciate the input.

It seems that the multigains fundmanagers sometimes use a martingale strategy to cover the losses when they have losing trades. Lotsize reached 25.6 lots at some point. I asked some questions about the risk managent to the website owners but I'm still waiting for a reply.

In the meantime I've been looking at this: metatrader-experts.de/en/expert-advisor-for-sale/strategy-fi-x.html
They are basically managing the account with an EA that is based on one of their previous EA's. I have used that bot (called magic champ II) and it has performed very well for the last two years (myfxbook live account). I assume that this company is realiable since they've been offering services for quite some time? Any relevant input about this offer would be appreciated.

Thanks again.
Pharaoh
7 years ago,
Registered user
That site seems to spend a lot of time bragging about backtests. Backtests only indicate that it's worthwhile to try small forward tests, not that you should place $25,000.

They offer to cut their fee from 30% by 10-20% if you use them as an IB. I'd want to know a lot more about their trading style (from a live forward test) before even contemplating dangling a temptation to churn an account.

Since it's EA delivered in this way, I wonder if they use an LPOA or just have you send their share at the end of the month.

If you are really tempted by this one, first, ask to see results from a $25,000+ account using investor access. If they are worried about trade copying, tell them to send you the password after market close on Friday and they can change it before the market opens on Sunday. The account should have been trading for at least 3 months. I can't think of any good reason for them to not to happily provide this.
VermeirJ
7 years ago,
Registered user
Hi Pharoah,

I forgot to thank you for your last reply; The input is very much appreciated. Indeed, you're right. I don't plan on risking that much money on an automated strategy.

I have still not entered a managed account since my last reply.
However, I've been having some email communication with a representative of a company called SwiftTradeFx, seemingly located in Hong Kong. The company is unlicensed; according to the representative licensing was unessecary for spot forex trading according to SEC regulation in Hong Kong. They showed me audited reports for the monthly performance; The third party auditor seems to be legit. Unfortunately, they were unable to provide me any historical trading logs (their argument was that it was a proprietary strategy, and the industry standard was to provide general audited performance logs..). The broker is ATC, which is an ECN/STP broker. Some of the statements in the LPAO were kind of strange; The document stated that "I am classified as a professional client", not a retail client. According to the representative this was normal, because I am applying for a managed account. I also have to sign an extra document, a service fee authorization (service provider = ATC) that also seems to serve as an LPAO. The replys that I got from the representative where always very swift and thorough and according to me, this company seems to be legit. But then again.. I don't really know much about it.. Is there anything that I just mentioned that might be abnormal?

Edit: I forgot to mention that I found another company that seems to be legit at peakforex.com. They seem to provide a lower risk/reward managed account with a long historical track record (as compared to most fx managed accounts). However, I still need to contact them for some more information.

I always appreciate any input you might have.

Thanks again.
Pharaoh
7 years ago,
Registered user
> Hi Pharoah,
However, I've been having some email communication with a representative of a company called SwiftTradeFx, seemingly located in Hong Kong. The company is unlicensed; according to the repre..

Easy enough. Just contact the HK SEC and ask them if this company should be regulated or not.

> They showed me audited reports for the monthly performance; The third party auditor seems to be legit.

Check the wording on those reports. I've seen "audited reports" where the auditor pretty much says "I've read what they sent me and the numbers that they sent add up". This means that the reports are internally consistent, not that they reflect accurate trades.

> Unfortunately, they were unable to provide me any historical trading logs (their argument was that it was a proprietary strategy, and the industry standard was to provide general audited performance l..

Red Alert! If they won't let you view a single verifiable live account statement pulled from the broker, I'd say to skip them.

> The broker is ATC, which is an ECN/STP broker. Some of the statements in the LPAO were kind of strange; The document stated that "I am classified as a professional client", not a retail client. Accord..

Red Alert 2! Contact ATC immediately and ask them about this.

> I also have to sign an extra document, a service fee authorization (service provider = ATC) that also seems to serve as an LPAO. The replys that I got from the representative where always very swift ..

All perfectly normal - for a company that doesn't want you to see how they really trade.

> Edit: I forgot to mention that I found another company that seems to be legit at peakforex.com. They seem to provide a lower risk/reward managed account with a long historical track record (as compare..

Peak Forex says on their website that they are a division of Peak Capital Group. I see one Peak Capital Group listed with the NFA. That one withdrew from the NFA in 2006.

I recommend asking Peak if they are regulated. If they say they are, check out the registrations with the regulators. If they say they don't need to be regulated, ask the NFA and CFTC for their opinion of this.

The historical track record on the website is just a table with numbers in it. As always, request access to a live account with a significant amount of trading history.
Fxmanagement
7 years ago,
Registered user
This is a very interesting thread right here. First time I post, and this is worth my time. I don't know if I am the first account manager here to post, but here is the point of view from an honnest account manager.

First of all, I want to insist on the fact that I will not tell my company's name at any moment to any member of FPA, since I am not here to promote, or to brag me out. Also, I do not encourage anyone to invest with a portfolio manager of any sort, trading is risky and can lead to major financial losses. Be sure that the money you put in the market is money that you would agree to lose and it wouldn't change your own wealth. Last, I would like to apologize for any grammar mistakes I make, English being a foreing language for me. A site moderator is more than welcome to edit my post to rephrase any mistake I did.

First, I will tell a bit how my company works. Most of my investors are really rich ones that did invest over 2 million. I started 5 years ago into the management funds because I did not have the ressources to start my own trading. And also I had better skills at getting investors than actually trade, but loved the industry. I also have a pool fund for little investor that can invest as low as 1000$.

Now in the first post, it says to avoid pooled management. But I do believe the opposite. Cause first of all, I have several traders that work for me, all with different strategies, approach, market hour, and also different index or currency or commodity. The question is, what real professional trader would trade a 1k account? These guys trade account in the 6 and 7 digit, why would any of them waste their time on a 1k account? But I wanted my fund to be accessible to small investors, and to some people that are ready to take the risk. Another thing about pool fund is, not a single trader manages one single portfolio! That would be way too risky. what if he has a really long bad streak. That would mean one investor in may got a 40% return and another one lost 40%..? Under the exact same company? That's not possible.. So as risk management, my pool fund is split into more than one account, and traded in different market. This way I reduce the risk that a single trader might have a bad month. So if a portfolio manager tells you he will do specific money management into your own personnal 300$ account... that's very hard to believe that he's good. Anyways, it's hard to explain, but hope you understand the picture here.

Second of all, in the first post, I was reading about account manager that suggest a certain broker. And I am very impressed by what was writen there. To me... Most of the broker are too avoid, and I only trust 2 (maybe 3, but debating about the third) broker. A Manager that will suggest a certain broker because he will get rebates is, in my opinion, clearly not working for the investors interest. Cause he is looking to make money from the broker (wich we know most of them work against you) instead of making money from the market. Also in a pool fund, you get to have a much greater account, and larger the account is, the better the spread and commission you get. I do not think there are "real" ECN broker that offers account of 1000$. It will be called ECN account.. but it won't be a real ECN account, and you would still get re-quotes on it. So I would avoid any manager that "suggest" a certain broker or another.

Also make sure that this company is regulated. I am regulated in Canada, and I have all the proofs of it. Someone that can only bring certain regulation, or is SO PROUD about ONE regulation, IS a scam, period. If the first thing you see on the website is in the big middle their regulation, it's a scam. To me, regulation is not even a question. I provide it to whoever needs/wants/asks, but I never think about it. Because being regulated comes with a managed funds, it's a little like asking an construction entrepreneur if he has his licence. Of course he will be able to bring it up. But if he comes into your house with his licence in front of him, put it in your hand, tell you he has the licence 20 times, brag about it... then it sounds like something's wrong, doesn't it? Like why are you so insisting about regulation before I even asked for it?

Anyways, I could keep on, but I would rather any questions someone have for me. I really find it nice to see a thread against scammers. Too many people gets robbed by these criminals.

Simon
Pharaoh
7 years ago,
Registered user
Pooled investments are not all scams. I'm sure there are some great ones out there. On the other hand, in some ways pooled investments are much more vulnerable to scam. For a typical pooled investment, you send your money to the account manager or to the management company, not to the broker. The money is NOT in your personal brokerage account where you can keep a close eye on what's going on. Under these circumstances, some or all of your money may not really be invested. You have to have faith in the account manager's version of what's going on. That's why so many of these later turn into Ponzi scams (if they weren't one at the very beginning). NOTE: A PAMM account with a good forex broker can resolve some of these issues, but I assume that's not what Fxmanagement is referring to.

Assuming that the manager isn't directly planning to scam you, the risk of the broker used ripping you off is just as great as if you had your own account with the same broker. You're already risking having any account manager turn out to trade badly. A pooled investment places the account manager in a position to grab the money without it ever going to the market in the first place. Why add another layer of risk to your investment?

Although sticking to a licensed and regulated account manager will make this sort of thing safer, remember that Bernie Madoff was licensed and regulated.
SilverOne
7 years ago,
Registered user
thanks for all this info, cheers!
alkamahmad
7 years ago,
Registered user
I am looking for a very secure account manager could please tell me how to contact this guy?
thank you
best regards
Ahmad
Pharaoh
7 years ago,
Registered user
You want to place your money with someone based on a single post he made in the forums? Did you miss the part about due diligence and careful research?
Capitcho
7 years ago,
Registered user
Pooled vs PAMM

Thank you for the post.

Sorry but I did not get the difference between pooled and PAMM accounts.
Pharaoh
7 years ago,
Registered user
As I understand it, PAMM is special form of pooled account. You open an account with a broker, then can transfer some of all of your funds into one or more PAMM accounts. Unlike a "normal" pooled account, your broker has set things up so that your account manager can't withdraw all of the money and disappear. Your initial investment (plus or minus any profits/losses and performance fees) can only be moved back to your primary account with the broker and then be withdrawn by you.
Capitcho
7 years ago,
Registered user
Talking about PAMM, what is in your opinion the most fair way to compacete the manager for his performance without payingo for poors results?

Do you like "water mark" method?
Pharaoh
7 years ago,
Registered user
If you read back a few pages, you'll see me debating compensation methods with an account manager. In my opinion, unless you are dealing with a large, well established, regulated account management firm with a sterling reputation, then a percentage of the high water mark should be the one and only method of compensation.
timothy1000
7 years ago,
Registered user
Hi Pharaoh,

Thank you for posting this thread, it has probably saved me from losing a lot of money! I am now rightly extra skeptical about managed account services.

I was considering going with a firm called Tridence Capital (tridencecapital.com) , but I don't know whether they are legit or not. I was hoping you could give your opinion on them?

Thanks,

Tim
Pharaoh
7 years ago,
Registered user
The good news is that it's not a pooled account or a HYIP.

And now, the bad news.

The domain was registered in June 2012, yet claimed performance goes back to early 2009.

Performance is just a claim and a graph, not independently verifiable.

They collect a 1 pip commission, win or lose. This could encourage churning.

They want to play with at least $10,000 of your money, but have no postal address on their website. WhoIs data is all privacy protected.

Multiple account managers can smooth out wins - and losses.

They claim to be in Key West, but I don't see any NFA registration number. Instead, they are only accepting US accounts through some alternate system.


That's more than enough warning flags for me.
timothy1000
7 years ago,
Registered user
Cheers Pharaoh - you're doing a really good deed protecting so much of us from scams.

It seems that, in my investigations of managed accounts, all I am seeing is scam after scam, or even if the managing company has the best of intentions, burned account after burned account. I know you said for no one to ask you to recommend a managed account, but I am finding it impossible to find even ONE with regulation, honesty and a decent independently verifiable track record.

About Tridence Capital, the red flags you raised were ones which, based on reading your thread, I had noticed too. I have asked them about the domain, independent performance verification (including audits), as well as account churning. (On their site they claim to have strict rules preventing churning.)

Their business address is in Key West as they say: sunbiz.org/scripts/cordet.exe?action=DETFIL&inq_doc_number=L12000069538&inq_came_from=NAMFWD&cor_web_names_seq_number=0001&names_name_ind=&names_cor_number=&names_name_seq=&names_name_ind=&names_comp_name=TRIDENCECAPITAL&names_filing_type=

They claim to be using CTAs which, unless I am mistaken (please do correct me if I am wrong as you know much more on this matter than I do) must be registered with/regulated by the NFA, and must have all records of previous accounts accessible. I have also asked them as to their traders' regulation, if any. But if they were regulated by the NFA/CFTC then they would be able to accept US clients, right? Or could it be that the firm itself is not regulated but the individual traders are?

I have asked them these questions and a lot more (using your original stellar post as a basis) and I will post their responses, unless you wish me not to clog up your thread. However it could be of benefit to future enquiries of FPA members as to what questions exactly should be asked (and of course I would welcome you to add any others you think need to be put to any prospective account manager).
Pharaoh
7 years ago,
Registered user
US Based, employing CTAs (who are registered), but declining US clients except through some sort of alternate program and showing no sign of NFA registration on their site. I'd love to see their explanation for this. I'd also love to see the NFA's opinion.

I've seen one too many account managers operating under "strict no-churning rules" go off the deep end when he realizes that the ONLY money he'll make is from the IB commissions on his losing trades.
HDG
7 years ago,
Registered user
> If you read back a few pages, you'll see me debating compensation methods with an account manager. In my opinion, unless you are dealing with a large, well established, regulated account management f..

Even monthly High watermark is not foolproof.Say I start with $100 and after one month profit is $100. Manager takes $50 as his share. He trades recklessly and loses $100 in next month and stops trading on some pretext.In the end I have lost $50 and manager has made $50. This happens in real life and has happened with me. Only solution is---increase the time period for sharing of profits from one month to minimum three months and to share only half of the profits. Rest should be kept in the account to compensate future losses. Full payment should be made annually. I AM SURE NO MANAGER WILL AGREE.
Managed accounts fail because whole risk, unfortunately, is of investor. manager ONLY SHARES PROFIT without any risk.:mad:

I am not happy with ZULU trade terms also. They add about 3 pips in spreads as commission from the brokers.
So the results of traders shown in their history may not reflect real picture.:(
Pharaoh
7 years ago,
Registered user
Let's see. Manager makes money, takes his cut, then looses some money and stops trading. And you think that's a worse deal for you than paying a losing manager to keep trading and losing more?

High water mark payments weed out the unsuccessful managers very quickly. This is why seeing a live track record is essential before allowing anyone access to your funds.

I do agree that holding management fees in escrow for a few months would be a good idea. This would allow several months of high water mark fees to be refunded if there is a large loss. Unfortunately, most forex brokers don't have a mechanism to accommodate this. A manager may claim to offer this, but until you get such a refund, there's no way to tell of that claim is real or not.
F0r3x123
7 years ago,
Registered user
Hi pharaoh,

One important point is that some managers show historical profit that would transform them into W Buffets in some years.
Pharaoh
7 years ago,
Registered user
> Hi pharaoh,

One important point is that some managers show historical profit that would transform them into W Buffets in some years.

Unrealistic "perfect" returns shown on a website are a big red flag. It's another reason to demand a chance to view live trading records directly from the broker's website.
ramlee1962
7 years ago,
Registered user
which forex company better and nice forex manager in Malaysia ?

hello Master,

Im ramlanne from kuala lumpur , Malaysia...pls help me to search which forex company in or base at Malaysia, which safe and flexible to apen my forex account ? :confused:

Tq.

ramlanne
KL
Pharaoh
7 years ago,
Registered user
My recommendation is to be less focused on what country your manager is in and be more focused on two things:

1. Is your account manager licensed or regulated in any way?

2. Can your account manager provide investor access to a live account that's been used for trading? If so, for how long of a time period have they been trading the account?

Some will say that #1 isn't so important. Most brokers will let anyone manage your account if you sign an LPOA. The great advantage of a licensed and regulated manager is that it's much easier to check out this person's real reputation with the regulator. Unlicensed ones won't face any penalties if they violate agreements about risk and drawdown, thus wiping out your account.

#2 of the most important. Anyone wanting to play with YOUR money needs to show that they have real experience trading real money. If a potential account manager won't let you look at verifiable trading records, ignore whatever pathetic excuses are offered and then take your money and run in the opposite direction.
Krachuk
7 years ago,
Registered user
Excellent insight into the other side of FOREX Trade ! A must-read for every Forex Trader. I would suggest if the salient points above could be re-written into a informal guideline. Well, if the Moderators cannot do it, I can volunteer to do it. Thanks !
Once again excellent piece of info.