One of the fastest growing areas in Forex has been the Forex Money Manager side of the business. Forex Traders that experience frustration with losses often is looking for a hired gun to make things right. With the advent of social trading and now that many traders can display their successes on sites like MYFXBOOK the ability to find a money manager has never been more effortless. Often these Forex Money Managers are using an automated trading system like an Expert Advisor in MetaTrader 4. Through a broker, these Forex Money Managers then use a PAM or MAM allocation system so the trades can be distributed to the clients as per their request.
While all of this sounds great, it is essential that when selecting a Forex Money Manager, you do your due diligence. Technology and automation are great, but it is crucial that the Forex Money Manager take a hands-on approach even if they are using an automated trading system. Nothing beats eyes on the market and having a Money Manager that is always focused on the markets and is more concerned with risk management than their returns. Be wary of any manager that doesn’t oversee things and espouses that their system is on autopilot and is hosted on a VPS server.
A valuable lesson was learned when Forex Brokers that were using some of the best risk management systems in the industry much it automated could still not foresee or react to the SNB event of January 2015. Some of the most significant names in the industry were wiped out or nearly wiped out including FXCM and Alpari.
When choosing a Forex Money Manager, it is vital that the focus is on risk management and not necessarily on returns. Look at their drawdown level first and if they provide the information read about their strategy or strategies. If possible, try and use a Money Manager that is regulated or at least has been audited. If the Forex Money Manager has gone through the regulatory or audit process, he or she then has at least had to submit disclosure documents and trading parameters that they should adhere to.
Selecting the right Forex Money Manager is like any other form of investing it is critical to do your research and to know as much as you can about the Money Manager that you have entrusted.