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By: Leonard Leinow
What is the best way to evaluate a potential trader to manage your Forex account?
1) Protection - The biggest concerned is protecting accounts from large losses. Look to see that the trader uses a stop loss for all trades. Also, that the stop loss placement is such that the maximum loss will be relatively small. Having a stop loss placement far away does not do much good. Also, look at the leverage and risk used. Is the size of the trade is within reasonable limits. Having too many lots on increases the leverage. It is preferred to see smaller trades. When a trader tries to get larger profits from a few trades, this increases the risk. Large gains often mean large potential risk.
2) Maximum Draw down - Check to see no more than 20% maximum draw down from peak to valley, including open trade positions. Some traders hold open trades through large negative positions and only close them out when the trade becomes profitable. This does not show up on statements as statements only show closed positions. One has to have a live account that you monitor to really know what a trader is doing.
3) Performance - Check to see that the results match what the trader says he is making. Ask to see full statements. Does the trader's current claim of performance match what we are getting? Do you have confidence to believe the past results that are given. Ideally, you want to see at least 6-12 months past performance.
4) Trust - Do you feel you can trust the trader? If possible, interview the trader and ask a lot of questions in order to establish some level of trust. If there is a suspicion of lack of integrity, do not use him.
5) Flexibility - Will the trader work with you? Traders are an interesting breed. Many are set in their ways. If you make a request that clients to be treated in a certain way, will he work with you to customize his system. For example, can he lower the risk?
6) Broker - Does he work through a reputable broker? Insure that you have protection of the trading funds. Use brokers that are registered and approved by the CFTC, NFA or FSA. Use a limited power of attorney to allow the account manager to place trades.
7) History - What is his track record? How many clients does he have? How much money does he manage. You do not want to use someone that has a great track record trading their own funds but has never traded other people's funds. They may turn into a good money manager, but you want to see experience.
8) Consistency - Is the trader's performance consistent or sporadic. Many traders can have a good month or two. Look at the pattern of his performance for clues.
Best FX Funds has sourced and tested many account managers with the objective of proving them worthy. Check the website to see who is on their approved list of traders. All listed trading programs are tested with live funds before approval.
http://www/bestfxfunds.com
About the author:
Leonard Leinow has performed extensive research to find and test the top Forex account managers http://www.bestfxfunds.com
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Monday, February 15, 2010
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