What is the Forex account management agreement?

 

The LPOA or Limited Power of Attorney is a 3 party agreement among the investor, the asset managers and the broker, which control, designs and executes what’s is written and signed in the document. Every regulated broker has its own specific rules for its Forex account management agreement, depending on the financial regulations of each country.

The common rule for all the Forex account management agreements

The common rule for all the regulated brokers is that the client allows the Asset Managers to trade the client’s account in his behalf and allows the broker to pay a monthly percentage fee calculated over the high-water mark profits of the last month that the client’s account has had profits. It’s very important to understand that the Forex account management agreement never allows the asset managers to fund or withdraw funds from the client’s account. The international anti-money laundering laws only allow the client to make any funding and withdrawal to their broker’s account and it can be only accepted if the holder of the broker’s account and the holder of the bank account is exactly the same. The asset managers won’t get any fee in the case of a losing month in the client’s account and they won’t be able to be paid and fee again until the last loses are completely recovered. Our professional asset managers company accomplish all the requirement to work with the best regulated brokers like IC Markets, Vantage Fx and Synergy Fx.

Are Managed Accounts Safe?

Let your investments be fully safe signing the Forex account management agreement – LPOA agreement (Limited Power of Attorney). This 3-party form (broker, Forex investment company, you) let us to only trade your account. This is the only transaction we can carry on your name. We can’t perform any other arrangement like deposits, withdrawals, etc. Only you will be able to do those kinds of transactions. You can stop the trading at any moment signing the revocation form, but we are sure you won’t sign it once you start to get consistent profits with our account management.

Managed accounts serve as a highly transparent and safe form of investment, which provides multiple levels of control for both the trader as well as the investor. Professional traders with varying degrees of expertise can offer different types of account options to investors according to the magnitude of the investment and the risk appetite. Traders are free to charge their performance fee according to their preferences, and investors have the ability to verify the performance of traders before investing in a managed fund. Investors usually have the option of investing their money in a managed fund or open separate trading accounts which can then be linked to a managed account through the broker platform. Investors enjoy the freedom to enter or exit a program without any limitations, as managed accounts don’t have any lock-in periods; therefore, traders can pull out of a managed account if they are not comfortable with the trading behaviour or performance of a particular trader. Managed account investors can view a broad range of performance indicators such as trading history, profit potential, and risk factor before choosing to invest in a managed fund. One of the most important aspects of managed accounts is the safety of funds in a managed account. Managed accounts only serve as a pool of investments that follow the trading pattern according to a set of terms and conditions. An investor can choose the trading conditions and minimise or maximise risk according to their risk appetite and trading preferences. A trader, on the other hand, doesn’t have access to investor funds as the trading is performed according to the trading parameters that are automatically determined by the managed account platform.

Considerations While Opening A Managed Account

Managed accounts are entirely safe from any form of trader or broker manipulation; however, the risk factor of managed accounts always depends on the profitability of a trader. Managed accounts should not be considered as a safe and profitable alternative to Forex trading, as every investment has the risk of loss and is not free from market volatility. Human psychology also plays a significant role in determining the safety of funds in a managed account, as an investor can lose a majority of his capital if the trader succumbs to his emotions. Some trading strategies are also known to resemble a gambling attitude, which can enjoy long-term winning streaks, but losses can exceed the initial trading capital, which can spell disaster for an investor if he is not careful against such trading tendencies. Some managed accounts offer immense amounts of flexibility and freedom for controlling their investments, but it can also act against an investor if he is not careful about managing his open positions. Some long-term traders are confident of holding on to losing trades as they expect them to return to profits in the long run, but short-term traders with higher leverage may find such strategies to be in contradiction with their primary account size. Long-term strategies may not be suitable for small account holders, which can potentially blow an account if the investor is not careful while choosing their account manager. Nevertheless, managed accounts do offer the option of investing in the markets without worrying about the lack of knowledge or the expertise required to trade consistent profits. Traders should always perform their homework before investing in managed accounts, as managed accounts are not guaranteed to return positive results every time.

What Are The Different Managed Account Platforms

Brokers offer various types of managed accounts, and it is easy to find brokers with PAMM, MAM, LAMM account offerings that are aimed to create different types of managed accounts according to trader and investor preferences. Here is a breakdown of the most popular managed account platforms currently available in the Forex trading industry:

Percentage Allocation Management Module

PAMM accounts allow investors to allocate a percentage of their trading capital to copy trades from a master account. PAMM is different from other types of managed accounts, as PAMM investors can follow different trader accounts and diversify their trading capital by allocating different percentages to different trading systems. PAMM accounts offer more flexibility for the investor to choose multiple trading systems and hedge against any performance issues that may arise out of losses from specific master trading accounts.

Multi-Account Manager

MAM Accounts help the trader to manage multiple trading accounts using a single terminal. MAM accounts make use of combining individual trader accounts into a large pool of managed fund that comprises of individual trader accounts as well as investor accounts. All orders executed on the master trading account are reflected on every associated MAM account according to the parameters set by the investor. Investors also have the option of entering orders through their individual trading accounts and are free to modify MAM trades according to their preferences. The performance fee is paid to the master trader according to his performance and as a percentage of the returns. MAM account is an advanced type of managed account that offers excellent control for an investor and has several features enjoyed by both PAMM as well as LAMM accounts.

Lot Allocation Management Module

In LAMM accounts, the investor chooses the amount of lots that can be traded in the market, and the profits or losses are determined according to the multiples of lots invested in the market. LAMM is a more basic iteration of the PAMM account that aims to lower the risk of trading and is usually suited for larger accounts that have a higher trading capital. LAMM accounts are typically used when percentage allocation loses significance due to the higher trading capital, as a higher trading capital will have significant issues while filling orders at the interbank exchanges. Liquidity is a major concern for investors operating in the market with larger funds, as it is not always possible to fill entire orders at the existing market price if there isn’t any liquidity available in the market.

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Caution: Trading involves the possibility of financial loss. Only trade with money that you are prepared to lose, you must recognise that for factors outside your control you may lose all of the money in your trading account. TheForexCentre Ltd and its representatives take no responsibility for loss incurred as a result of trading. By signing up as a member you acknowledge that we are not providing financial advice. We have no knowledge on the level of money you are trading with or the level of risk you are taking with each trade. You must make your own financial decisions, we take no responsibility for money made or lost as a result of advice on Forex related products on this website. 

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