What Is a Forex Managed Account? | Definition & Examples

A forex-managed account is an account where a professional trader manages your money in the forex market. Instead of trading yourself, an expert makes decisions based on your risk tolerance and goals. You still own the account, but the manager handles all trades and invests for you. This is ideal for those who want to invest in forex without needing personal trading experience.

However, there are a few misconceptions about forex-managed accounts and details you should know before you begin. Therefore, at WR Trading, we have done the research and created this guide to help you get started.

What Are Pros And Cons Of Forex Managed Accounts?

Which Types Of Forex Managed Accounts Exist?

Forex-managed accounts come in different types, each for different investor needs and preferences. The three most common types are MAM (Multi-Account Manager), PAMM (Percentage Allocation Management Module), and Social Trading. Let’s break these down:

• MAM
• PAMM
• Social Trading

MAM (Multi-Account Manager)

A MAM account allows a manager to trade across multiple individual accounts simultaneously from one account. Each investor’s account is handled separately, allowing for customized risk and leverage settings. This flexibility is ideal for investors who want more personalized control while still benefiting from a professional manager’s trading.

PAMM (Percentage Allocation Management Module)

A PAMM account allocates investor funds into a single account, with profits and losses distributed proportionally based on each investor’s contribution. This type is more streamlined since all investors follow the same strategy, but there is less individual customization. It’s a popular choice for investors looking for simplicity and consistency.

See here our best PAMM Forex Brokers in comparison.

Social Trading (Copy Trading)

Social trading allows investors to automatically copy the trades of experienced traders on their selected broker. Unlike MAM and PAMM, this type doesn’t require a manager. Instead, you pick a trader to follow, and their trades are mirrored in your account. It’s ideal for beginner traders or those who want to follow successful strategies without actively managing their accounts.

How Does a Managed Forex Account Work in Detail?

Forex-managed accounts fall into three categories – MAM, PAMM, and copy trading. We’ll explain what these are later, but for now, we’ll focus on how to get started with copy trading, as it’s the easiest for beginners.

Step 1: Choose a Copy Trading Platform

The first step is to select a platform or broker that offers copy trading. At WR Trading, we’ve reviewed some popular brokers that offer social trading, such as RoboForex, eToro, and BlackBull markets. Choose a platform that aligns with your needs, like asset variety, fees, payment methods, and selection of professional traders to copy.

Step 2: Create and Fund Your Account

Once you’ve chosen a platform, you’ll need to create an account. After registering, you deposit funds into your forex trading account. The amount required to start copying trades can vary, so ensure you meet the platform’s minimum deposit requirements.

Step 3: Browse and Select a Trader to Copy

Most platforms provide a list of traders to follow, along with detailed performance statistics, risk levels, and trading history. You can filter traders based on criteria like return on investment (ROI), risk appetite, number of followers, or trading strategy. Take your time to review the trader’s performance before making a selection.

Step 4: Set the Investment Amount

After selecting a trader, you choose how much of your capital to allocate to copying their trades. Most platforms allow you to adjust the amount, ensuring it fits within your overall risk tolerance and investment goals.

Step 5: Monitor the Trades

Once the setup is complete, the platform automatically mirrors the trader’s positions in your account. As the trader buys and sells assets, the same trades are replicated in your account proportionally to the amount you’ve invested.

Step 6: Adjust or Stop Copying

You can monitor the performance of the trades in real time and make adjustments as needed. If you are unsatisfied with the results or want to switch traders, you can stop copying or choose a different trader to follow. Many platforms allow you to close individual trades or end the copy trading relationship without affecting your entire account.

Step 7: Review Fees and Performance

Most copy trading platforms charge a fee based on the trader’s performance, which could be a percentage of profits. Always review the fee structure to understand how much you’ll be paying for the service.

Are Forex Managed Accounts Secure?

Forex-managed accounts can offer a certain level of security, but they are not without risks.  While having a professional manage your account can help avoid errors you might make as a less experienced trader, there are still important downsides to keep in mind.

One of the primary concerns is the risk of fraud or scams with unregulated account managers. It’s important to ensure that the manager you select is trustworthy and operates through a regulated broker. The lack of transparency in some cases can also be an issue, as you might not always know exactly how the funds are being traded.

Moreover, while managers may have expertise, the forex market is volatile. This means that even with professional oversight, there’s no guarantee of consistent profits, and losses are always possible. You should never assume that a managed account eliminates the risk involved in forex trading.

How Are Forex Managed Accounts Regulated?

Forex-managed accounts are regulated through the brokers that offer these services. Regulated brokers, overseen by authorities such as the FCA, CFTC, or ASIC, must follow strict rules to protect investors. This includes segregating client funds, ensuring transparency, and complying with anti-fraud regulations. When a forex manager operates through a regulated broker, they must adhere to these rules, providing security for the investor.

In some cases, account managers may also need to be directly regulated. For instance, managers might need to register with bodies like the NFA or FCA if they manage large sums of money or provide investment advice.

For Which Type of Trader Is the Forex Managed Account Eligible?

To be eligible for a forex-managed account, investors must meet certain criteria, often set by the broker or account manager. While the exact requirements vary, they generally include:

• Minimum Investment Amount: Most managed forex accounts require minimum investment funds, ranging from a few thousand dollars to significantly higher amounts, depending on the broker or manager. This ensures the account is large enough to support the manager’s trading strategies.
• Accredited Investor Status (in some regions): In certain jurisdictions, like the US, some managed forex accounts are only available to accredited investors. This usually means individuals or institutions that meet specific financial thresholds, such as a high net worth or a certain level of annual income.
• Risk Tolerance Assessment: Investors may need to complete a risk tolerance questionnaire or assessment to ensure that the managed account is aligned with their financial goals and risk preferences. This helps the manager set strategies to the investor’s comfort with potential losses.
• Broker-Specific Requirements: Depending on the broker, additional eligibility criteria might apply. These could include residency restrictions, specific documentation, or the need to pass a basic suitability test to confirm that the investor understands the risks involved.

Who Should Use a Forex Managed Account?

Forex-managed accounts are ideal for traders who want exposure to the forex market but lack the time, experience, or desire to trade actively. These accounts are most suitable for:

• Busy Professionals: Individuals with limited time to monitor the forex market but still want to invest can benefit from a managed account. Professional managers handle all the trading activities, allowing investors to focus on other responsibilities.
• Beginner Traders: Those new to forex trading and who don’t yet have the knowledge or confidence to trade on their own may find managed accounts a safer way to get started. With expert guidance, beginners can participate in the market without the steep learning curve.
• Investors Seeking Diversification: Managed accounts can be a good fit for experienced investors looking to diversify their portfolio into forex without personally managing trades. By delegating to a professional, they can add forex to their investment mix without the stress of active trading.
• Risk-Averse Traders: Managed accounts allow for customizable risk levels. This is useful for investors who want a professional to manage risk based on their tolerance, providing peace of mind while still engaging with the high-risk forex market.

What Should You Consider Before Choosing a Forex Managed Account?

At WR Trading, we know that selecting the right forex-managed account requires careful consideration. To help you make the best decision, here are the key factors to keep in min:

• Regulation
• Fees
• Risk Tolerance
• Performance History
• Minimum Invest
• Reporting

Regulation and Reputation

The first thing to check is whether the broker is regulated by a reputable authority. Regulation ensures your funds are protected and reduces the risk of dealing with unethical managers. It’s also worth researching both the broker’s and the account manager’s track records. A solid reputation speaks volumes about their reliability and expertise.

Fees and Cost Structure

Managed forex accounts come with costs, and understanding the fee structure is important. You’ll encounter management fees and performance-based fees, usually a percentage of the profits. Make sure you know exactly what you’ll be paying, and compare options to ensure you’re getting fair terms. Transparent fees upfront can save you from surprises down the road.

Risk Tolerance and Strategy

You’ll want to ensure the account manager’s strategy aligns with how much risk you’re willing to take. Some managers are aggressive, aiming for big gains but with higher risk, while others prefer a more cautious approach. Make sure to communicate your preferences clearly so that their trading style fits your comfort level.

Performance History

While past performance isn’t a guarantee of future results, it’s still helpful to look at how the manager has performed in the past. Have they been consistent? How did they handle market downturns? These insights can help you judge whether their style and strategies are right for you.

Minimum Investment

Not all managed forex accounts are accessible at the same entry level. Some require only a modest deposit, while others might require higher minimums. Make sure the account you’re considering fits your budget.

Transparency and Reporting

Lastly, transparency is key. You’ll want regular, clear reports on how your account is doing. Knowing that you can track the manager’s performance easily helps you stay informed and ensures they’re sticking to the agreed strategy.

What Are the Best Forex Managed Accounts?

Finding the most suitable forex-managed account depends on the type of account you need and the reputation of the broker. Below are a few top broker platforms we’ve researched at WR Trading that are based on different trading styles and preferences:

BlackBull Markets: Best for MAM/PAMM Accounts

BlackBull Markets is a great option if you’re looking for a broker that offers more customization for MAM and PAMM accounts. BlackBull’s platform allows professional managers to customize strategies for multiple investors with real-time performance tracking. This means you can stay updated on exactly how your account is performing.

BlackBull Markets also offers flexibility in managing risk, allowing each investor to adjust their risk and leverage preferences even within a managed account. This level of customization is ideal if you want to have some control over how your funds are traded while benefiting from professional management. 

AvaTrade: Best for MAM/PAMM Accounts

AvaTrade offers MAM (Multi-Account Manager) and PAMM (Percentage Allocation Management Module) accounts. Professional managers can trade across multiple investor accounts while maintaining personalized risk and leverage settings. AvaTrade is known for being heavily regulated, providing extra security for investors looking for stability and trustworthiness.

AvaTrade is ideal for those interested in MAM (Multi-Account Manager) and PAMM (Percentage Allocation Management Module) accounts. With AvaTrade’s MAM accounts, professional traders can manage multiple accounts at once, allowing you to benefit from expert management while still maintaining some control over your risk levels and leverage. 

However, those who prefer a more hands-off approach, AvaTrade’s PAMM accounts pool your funds with other investors, with a single manager handling all the trades. What makes AvaTrade special is how easy it is to get started, along with the fact that they’re heavily regulated, meaning your funds are in safe hands.

RoboForex: Best for Copy Trading

RoboForex excels in copy trading, making it the perfect platform for those who want a hands-off approach to forex trading. With the CopyFX platform, investors can automatically mirror the trades of experienced traders, allowing them to benefit from professional expertise without needing to actively manage their own trades.

RoboForex’s CopyFX system gives you access to a wide pool of successful traders, each with a verified track record. You can filter through traders based on their performance, risk levels, and strategy, making it easy to find someone whose style matches your investment goals. Once selected, the trades they execute are automatically copied into your account in real time.

Conclusion

To summarize, forex-managed accounts offer a convenient solution for investors who want exposure to the forex market without the need to manage trades themselves. By entrusting your funds to professional traders, you can benefit from their expertise while maintaining control over your investment’s risk. However, choose a reliable and regulated broker that fits your specific needs to ensure your money is safe and the trading strategy aligns with your risk tolerance. 

Brokers we recommend at WR Trading are AvaTrade, BlackBull Markets, and RoboForex since each provides unique managed account services, such as customizable MAM/PAMM accounts or a hands-off approach with copy trading. The key is to understand your own trading goals, risk tolerance, and the level of involvement you want. 

Frequently Asked Questions on Managed Forex Accounts