Metatrader Forex Broker
Forex Managed Account Report
Learn how to trade various forex accounts from a single platform without any
administrative or compliance issues.
As of the date of this text forex managers are not required by law to be registered with the NFA as CTA's, although most forex dealing firms do require for the manager to be registered as a Commodity Trading Advisor in order to work with them. From a marketing stand point it is certainly beneficial to be registered. Investors are always strongly recommended to only invest with NFA registered CTAs. Since NFA registered CTAs are required to provide audited statements; in their disclosure documents there is a greater degree of transparency. Also NFA registered CTAs are required to disclose all fees to the investors. In order to get registered as a CTA you will need to take the series 3 exam, once you pass the exam you will need to submit the appropriate paperwork and create disclosure documents to get registered as a Commodities Trading Advisor with the NFA. In order to find out exactly how to get registered as a CTA, sign up for the series 3 exam, and stay up to date on exact rules please visit www.nfa.futures.org. There are also certain exemptions such as a friends and family accounts that are available for forex money managers. Once again to stay up to speed it is best to thoroughly research the NFA website and even contact their information desk.
With the master and sub account model (CTA) you are basically taking power of attorney over the accounts of your investors. To do this you need to set up a relationship with an introducing broker such as TradersChoiceFX. The introducing broker will set you up with a forex money manager control account at a forex dealing firm (typically GAIN Capital). Once your control account is set up you will typically determine the fees that you will charge for your investors. There are 3 basic types of fees that you can charge that will be covered in a later section. If you are trading for a few family members or friends, fees may be unnecessary. If you are intending to grow the CTA you will have to determine a proper fee structure. To get a better understanding of the fees to charge it is a good idea to consult a large well experienced and established introducing forex broker. They typically can work with you on a personalized level to help determine what fee structure makes the most sense. Once your fee structure is determined you will be given your own branded link and branded power of attorney (POA) to provide to your investors in order to open the account directly with the forex dealing firm. Once the structure is in place the process will continue as follows:
Typically the CTA is a much easier structure to organize and maintain than a hedge fund (CPO). If you are trading just for a small group of friends and family members or even a local investment club the CTA is certainly a simpler way to go. The CTA also provides the investor with the ability to pull out from your online forex trading at any time without notification to you. All they do is simply inform the dealing firm and their account will be removed from the master. Therefore they can withdraw funds at any time. Depending on your situation as a manager this can be both a positive and a negative. The positive is that your investors have the freedom and you are doing less administrative work. The negative is that you are actually not holding the funds therefore the resale value of your entity.
- The investors open individual accounts through your branded link at the dealing firms.
- Investors will fill out the power of attorney form basically notifying the forex dealing firm that you have the authorization to trade the accounts on their behalf. This form will also provide consent to the dealing firm to debit the predetermined fees from the account at the end of each month and credit them to your control account.
- Once the power of attorney form is signed and submitted, the account will be electronically linked to the master account and profits/losses that you incur while trading forex online on the master account will be allocated to the investor’s accounts based on the percentage of the master account that the sub account makes up. This will be explained in greater detail in later sections.
When you trade a managed forex account you are essentially trading one master account for multiple investors from one single front end. The profits or losses of the master account are distributed among the sub accounts (investors) based on the percentage the investors put in to the master or the lots that are allocated to each account.
For example if a master account consists of 2 sub accounts; one with $60,000 and one with $40,000; the total sum in the master is $100,000. The trader sees one account with a balance of $100,000. Lets say a trader makes a trade and wins $10,000. Because of the percentage distribution $6,000 will go to the $60,000 account because it makes up 60% of the master so it will get 60% of the profits. $4,000 will go to the $40,000 account since it makes up 40% of the master it will get 40% of the profits.
Forex trading involves significant risk of loss and is not suitable for all investors. While you can earn a cash bonus,
you can also lose money due to the inherent risk of trading. Read full disclosure
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