High Frequency Forex Account & Discretionary Trading

Recently, the hedge fund industry has received a lot of negative press. Whether its problems with access to funds or a Maddof-style Ponzi scheme, investors have had to learn to adapt quickly in todays economic climate and are now looking towards the managed account structure, seeking transparency and in many cases liquidity.Hedge funds are typically reserved for ultra high net-worth individuals or institutional investors seeking secure returns. For the most part, hedge funds are exempt from regulation due to the fact that due diligence is difficult to execute because of the multitude of different investment models.Liquidity of your investment can be determined by several factors. Investing in a hedge fund may require you to keep your capital locked up for several years. With your capital being pooled with other investors capital, redemptions must be submitted in accordance with the funds memorandum; typically a few months in advance as capital can be locked into positions depending on the strategy.Discretionary TradingOn the other hand, managed accounts have seen an increase in risk capital from savvy investors taking advantage of investment managers that were not previously available. A Credit Suisse survey of hedge fund investors last month found nearly 40% of investors plan to increase their holdings in managed accounts. The problems with hedge funds are their lack of transparency, risk, and lack of regulation. Managed accounts, however, help address some of these key issues investors are cautious of. Transparency in todays environment is crucial and will remain so in the future. As an investor, having the advantage of logging into your own personal account in real-time and see the trading live means you know how your account is performing without the need to wait for a quarterly report. MAN Group, one of the largest and oldest investment firms in the UK, was awarded last month with a mandate from the German pension fund giant Bayerische Versorgungskammer for 1.2 billion EUR.Risk boundaries are different for every investor and it is paramount when selecting your managed account that you have a complete understanding of all the risks involved. Is there a max drawdown preventing a margin call? How much leverage is applied to the account? Some managed accounts now offer custom programs that can match the risk profile, investment objectives and transparency requirements to suit the profile of each investor individually.With hedge funds being only eligible for the elite, managed accounts offer a much more cost effective route to the market. Many asset management boutiques have different requirements for entry; some have minimums as low as $10,000 USD. It is essential that all risk capital is truly capital you can afford to lose, as this is a real possibility with every investment.Regulators around the globe have had to step up their game in order to protect investors. Month after month we have seen Forex FCMs, Introducing Brokers, and money managers shut down for many reasons ranging from lack of capital to regulatory infractions. As an investment, a managed account can offer a an environment where the tra. Investors open their own accounts with a designated broker. It is vital for your security that you confirm that the designated broker is regulated and find out what happens to your investment if the broker shuts down. In the USA, the NFA & CFTC have taken several steps to weed out rogue brokers by increasing the capital requirements and enforcing stricter guidelines. In 2010 the CFTC carried out 57 enforcement actions and opened 419 investigations into possible violations. BMX bikes . In Switzerland, FINMA demands Forex brokers now require a banking license causing many brokers to flee or to close. Legitimate asset managers deal only with prime brokers of a high caliber that will offer the investor transparency and a regulated environment that you would expect.The relationship between the investor and managed accounts are governed by a Limited Power Of Attorney or LPOA. In simple terms: This grants the asset manager permission to trade the investors brokerage account but does not give the asset manager access to withdraw or deposit funds. Also, investors will not be able to trade their accounts at the same time as this could result in conflicting strategies. Although investor accounts are being traded in liquid environments you should discuss redemptions with your asset manager. Typically, freedom to withdraw profits or capital from a managed account is the investors choice.Hedge fund managers frequently make headlines for their incentive-driven performance pay with most hedge funds incorporating a 2 & 20 approach 2% management fee and 20% performance fee. Some companies act as intermediaries to managed accounts; this structure has a number of benefits for the investor. Most referring partners of managed accounts are industry professionals who offer a variety of options based on many factors such as risk profile and prime broker. This can simplify the selection process of choosing the correct managed account to match the investor profile. The managed account company can tailor a program to suit the individual objectives of the investor or act as a consultant. Introducing/referring agents will typically be remunerated a portion of the performance and management fee at no extra cost to the client.High Frequency Forex Account With the recent rise of Forex managed accounts, more and more brokers are looking to see how they can integrate their services with asset management houses; the greatest influx of capital comes from asset managers and hedge funds. In March, the hedge fund industry had a market capitalization of $15.7 billion, a lot less than the previous month while CTAs were allocated $6 billion according to Barclay Hedge. Brokers captured this volume from the CTAs, which will lead not only to advances in technologies on the trading side but also on the client facing side. Institutional trading is very different to retail trading and with heavy demands on all parties to perform flawlessly, asset managers are now able to offer better stop losses on their clients accounts. This has evolved rapidly into the broker directly executing the stop losses, eliminating rogue trading if a draw-down had been hit but not executed, completely independent of the trader and the investor.Many Forex brokers offer capital introduction programs; introducing broker (IB) will refer clients to the Forex broker in return for capture a piece of the trading flow of the clients they refer. Not a new concept but now it is more defined and regulated. From a brokers perspective, the managed account program will be high-frequency, thus adding a higher monthly revenue to the IB. Typically, managed account traders will have a preferred interface of Currenex or other ECN type caliber. These platforms are designed to handle larger orders and execute partial fills to execute all orders.The popularity of managed accounts is on the rise. Most managed account companies have arrangements in place to accommodate the broker market. Cautious investors have demanded transparency, which has helped the rise of such a simple structure and a catalyst for many Forex brokers to become officially regulated enabling them to offer new products and services which they were unable to offer previously. Large FCMs used to offer their own managed accounts to their traders, however with the advent of continuously tightening regulations, these programs have gone by the wayside and traders are left to their own devices. This a lot of times means that traders have to resort to google and sites that offer ratings and results which are not always accurate.A few things to always keep in mind when you are evaluating a managed program or fund.Who is doing the trading? Is it someone who has been in the business for years or a guy who was selling cars last year.What kind of results are they producing? If it is too good to be true, it usually is. Forex has had this mythical aura surrounding it that somehow money managers can produce these outlandish results and you can double your money every year. Be realistic anything over 25% per annum begins to border on questionable.Make sure the company/manager is licensed by a respectable regulatory body i.e. NFA/CFTC or FSA. Be very wary about anyone else from smaller regulatory bodies or no regulation at all as there is no way to enforce churning. Churning is over trading the account with no concern for the trades outcome but just to create trading volume for compensation from the broker.Know the product, if you expect someone to trade a Forex account for you, know something about Forex. Dont just write a check and pray. Nothing in this world is ever that easy, be informed as to what someone is doing with your hard earned dollars.Dont ever be afraid to ask questions, if at any time you are uncomfortable you can pull out.Ramp up your investment, start with the fund minimum and watch how it performs, if you are getting good returns, slowly add funds. You can always add more to make more but the broker is never going to give you a refund.As the Forex market continues to gravitate towards the human nature of laziness with more traders everyday looking for managed funds and automated trading, please some common sense and make good choices. Remember if it was that easy, we would all be millionaires sitting on the beach, I wouldnt be writing this article and you wouldnt be reading it. Good luck with your trading.