Managed service - 8% - 10% per month?

All, I'm new to this forum so wasn't sure whether this should go on this section or main. Apologies if it should be elsewhere.

I've used practice / demo account for about 18 months or so. Mainly DBFX, FXCM, but also looked at many many black box systems, robots, experts etc. etc. and from what I can see, it is possibly to make large amount of money with forex, but also possible to lose large amounts of money very quickly too. Some systems work for a while then they don't, others are just useless from the outset and other claim to promise the earth.

So, I've been looking out for a managed forex service / account. ie where the trader takes my money and returns me X % per month, quarter etc. ideally I want a trader who trades little, and often, and relies therefore on compounding, rather than making massive returns each month. However, whilst I know there are many many brokers, traders, companies who trade forex professionally, I can't find such a service being offered anywhere? Does such a thing exist at all - and if so, where? is it only for very very wealthy individuals?

The reason I ask is that I've actually come across a service which claims to be able to return me 8% to 10% per month and being perfectly honest, it just sounds too good to be true! it seems to fit the requirements perfectly. Low stop loss, trading little and often, modest (relative) returns each month etc. If I look at the figures and assume that i invest say, £10k with this service, in 4 or 5 years time, I've got the same capital as a small African country's GDP!! AND, it would be paying me 10's of thousands of pounds per month!!

There are a number of reasons why I'm very cautious about sending some dosh over to these guys. Primarily, its because they say its offshore and therefore unregulated- the reason they give for this being the tax advantages. Understood but seriously, if you are making so much money, do you really care about paying tax - and why not do it in this country - with the protection of being regulated etc.? There are other reasons why I'm so cautious, which I can't really go into on here.

Sufficed to say, they will pay me a commission based on the cash that others that I introduce to the service put in. Suddenly, the alarm bells start ringing! is this a Ponzi scheme - ie get as much cash from as many people as possible until the company suddenly loses all your money in a "bad" month?

So, am I being completely blinkered by the gains that they claim can be made? Are the returns realistic? So such other services exist - and if so, where and who are they?

thanks.

You definitely posted this in the correct forum.

Vark hit it directly on the mark, great info! Do your homework when looking for a managed account. I manage for a very small group of investors in my hometown, but I'm not NFA or CFTC registered yet and I have lost a few prospective accounts because of this and it is high on my priority list for the future growth of my business.

But, being a small community, I know all my investors personally and not being registered is not a big deal to them as long as I produce results. Also, by using more of a higher risk trading model, my potential clients have been limited even more. But this is how I run my particular trading operation and my clients know this upfront before I ever take anyone's investment.

I have to disagree about pooling accounts though. I trade using a PAMM Account. A PAMM Account is a trading account that consists of one or several managed accounts, representing independent and unified trading structure, that is traded only by the Manager of the PAMM Account. Several Managed accounts included in a PAMM Account are considered by the trading platform as one whole account. The principle the PAMM Account is to proportionately distribute the losses and gains between all the investors' accounts by trading on a single entity.

A PAMM Account has a distinct advantage for investors from the point of view of receiving potential profit without necessity to execute any trading operations. For the Manager, it is advantageous as he receives his commission for managing all the accounts of his investors.

Here an example:

A successful trader, Smith, opens a PAMM Account at Broker A and becomes the Manager. The Manager’s own capital investment is say, $20,000 USD. Smith then presents Broker A's clients with the opportunity to place their funds under his management. The Manager (Smith) proposes to share the profit between the Investors every quarter (trading interval), while 20% will go to the Manager (Smith) as commission for his work. Investors Simpson (Investor 1) and Ford (Investor 2) decide to invest their funds in Smith's (Manager's) PAMM Account. Simpson and Ford invest $50,000 USD and $30,000 USD respectively. Thus, the PAMM Account balance, including the Manager's own capital, is $100,000 USD (pic. 1).

http://www.alpari-forex.com/static/f..._pamm/en/2.png

Pic. 1. PAMM-Account balance at the start of work on the account

Due to the Manager's successful performance, the PAMM Account makes a 50% profit ($50,000 USD) on the initial deposit ($100,000 USD) in the first quarter and the PAMM Account balance becomes $150,000 USD. Respectively, Investor 1 (Simpson) makes a 50% profit ($25,000 USD) on his original investment ($50,000 USD) and pays the Manager commission in the amount of 20% ($5,000 USD) of his profit. Investor 2 (Ford) makes a 50% profit ($15,000 USD) on his original investment ($30,000 USD) and pays the Manager commission in the amount of 20% ($3,000 USD) of his profit (pic. 2).
http://www.alpari-forex.com/static/f..._pamm/en/3.png
Pic. 2. PAMM Account balance at the end of the first quarter


The Manager’s (Smith's) work on the PAMM Account during the first quarter results in a net profit of $50,000 USD:

 

1. Investor Simpson — $20,000 USD;
2. Investor Ford — $12,000 USD;
3. Manager Smith — $18,000 USD ($10,000 — profit on his share, $8,000 — Manager’s commission).

At the beginning of the second quarter, the Manager (Smith) withdraws his profit ($18,000 USD), Investor 1 (Simpson) completely reinvests all his funds ($70,000 USD), and Investor 2 (Ford) withdraws $2,000 USD and reinvests his remaining funds ($40,000 USD) (pic. 3).

http://www.alpari-forex.com/static/f..._pamm/en/4.png

Pic. 3. Reinvestment and Withdrawal of funds

Another Investor, Jackson (Investor 3), joins the PAMM Account and invests $10,000 USD (pic. 4).


http://www.alpari-forex.com/static/f..._pamm/en/5.png

Pic. 4. The PAMM Account balance at the start of the second quarter


Due to the Manager's successful performance, the PAMM Account makes a 100% profit ($140,000 USD) on the initial deposit ($140,000 USD) in the second quarter and the total PAMM Account balance now becomes $280,000 USD. Respectively, Investor 1 (Simpson) makes a 100% profit ($70,000 USD) on his original investment ($70,000 USD) and pays the Manager commission in the amount of 20% ($14,000 USD) of his profit. Investor 2 (Ford) makes a 100% profit ($40,000 USD) on his original investment ($40,000 USD) and pays the Manager commission in the amount of 20% ($8,000 USD) of his profit. Investor 3 (Jackson) makes a 100% profit ($10,000 USD) on his original investment ($10,000 USD) and pays the Manager commission in the amount of 20% ($2,000 USD) of his profit (pic. 5).


http://www.alpari-forex.com/static/f..._pamm/en/6.png
Pic. 5. PAMM Account balance at the end of the second quarter

The Manager’s (Smith's) work on the PAMM Account during the second quarter results in a net profit of $140,000 USD:

 

1. Investor Simpson — $56,000 USD;
2. Investor Ford — $32,000 USD;
3. Investor Jackson — $8,000 USD;
4. Manager Smith — $44,000 USD ($20,000 — profit on his own share, $24,000 — Manager’s commission).

This example has described the general framework of work of a PAMM Account at Broker A. It is designed to show you that you can still be in total control of your account while still utilizing the trading power of the whole account's size and structure.

I'm sorry about being a little long winded, but I wanted you to get my full opinion.

Good info. My managed account (I am the investor) is setup the same way. The only drawback is this (coming from personal experience): you can't ask your broker to close out individual trades on your account, because they are a part of the master trade. For example, if your trader made a mistake and entered bad trades and the market is completely against you, and he tries to salvage what's left by hedging and then the market is in the flat and you want to cut your losses and let's say, close that negative short position, he can't do that just on your account, he would either do it on all accounts (because they are all traded as one) or close out all your positions, including potentially profitable.

Other than that, great info, just don't forget, that in PAMM accounts either you all win or you all lose.
In teh recent weeks the drawdown on my account is 80%, as in "80% of equity is gone", but that is what risk disclaimers are for, read them carefully!

Good point, but if you are closing out your own trades then why bother to have someone manage the account. Isn't that in some way undermining the purpose of the account manager? Absolutely no disrespect here Vark, but I believe if you are to get into a managed account situation, you need to trust the trades the manager takes, good or bad. If you feel the performance is not there, then just close the account and find a better manager.

non taken and you are right.

http://www.jonrb.com/emoticons/yikes.gif

yeah, tell me about it

That's the thing, some of these small time fund managers take extraordinary risks with client's capital, it's the only way they can make it worthwhile for themselves. It's all upside for them, no risk and ~20% of profits, it's a disaster just looking for a place to happen!

I think brokers who offer PAMM to anyone who wanders in off the street should also offer a facility for investors to set a maximum loss limit which if reached automatically prevents the kamikaze fund piker from going for broke....with your money!

pipmutt makes a great point. Although I'm one of those "small time managers", not all of us are that way. I specifically have it in my client agreement where we set maximum drawdown percent limits to protect the clients from that type of risk.

You have to understand, we are like stockbrokers, clients come to us to take care of the dirty work for them because they A) have no clue what there doing, or B) they don't have the time or patience to do it themselves. But clients need to understand all the risks beforehand and can really only blame themselves for the managers they hire.

I also run a locksmith business and we have customers sign a damage waiver before we can open their car. Same concept, different business. A car is meant to be opened with a key, so when you have to use alternative means to get in the car, damage is always a possibility. When you hire an account manager to trade the forex market because you can't do it yourself, trading losses and blown accounts can happen (like damaging a vehicle). We, the account managers, are not going to accept any of the risk because we didn't create the situation in the first place. It's like someone saying I want to hire you to drive my $600,000 Enzo Ferrari to California, but if you wreck it you bought it. If that was the case, you'd never find a driver.

Now don't get me wrong, it should not give the account manager full reign to do as he wishes by any means. But control over the account manager is done in the trading agreement and you must make sure you understand every little sentence before signing it or the fault drops in your lap, not the manager. If someone wants to see my trading agreement as an example, I will gladly e-mail a copy to anyone who wants to look at it.

I generalized, present company excluded!

Seriously though you seem to be professional and know what you're doing, but as you know there are plenty who don't!

I blame the clients as much as the managers, they hand control of their money over to a stranger and then wonder why they get burned, it's no wonder some of these ponzi schemes survive.

Persoanlly I'd start an unknown manager off with a small investment, if I like what I see then I can always add funds later, and if I don't like what I see then I can pull the account, simple.

I think small clients and inexperienced investors have unreasonable expectations though, they look for high returns on their few thousand bucks and then moan when the thing blows up!

I did that as well, Dec was the test run, Januaray added more funds - great, February added more funds - great up to Feb 25-March 1st, when GBP plummeted.
Good thing I have a High Watermark agreement, hopefully it can be rebuilt.

Sorry to hear that, it sounds like you did everything you could, but 80% is a bit much (understatement!!).

Unfortunately now you run the risk of losing the other 20% because the 'manager' is in effect working for nothing until he makes more than 400%. If he's sensible and has learned his lesson (which you have to doubt given the circumstances) then it's likely to take him around 3 years to break even, and that's if he does well! He'll probably be worried that if (big if!) he's makes back the losses you'll bail out anyway so what's he got to lose by going nuts with leverage and risk.

I don't know the numbers involved and how losing the other 20% would affect you financially, it might be that you can write it off so I guess you may as well leave him to pull a rabbit out of the hat!

Hey here's an idea, add more so he can make the losses back quicker, lol

edit: out of interest what were his returns like up to the loss?

about 20%

vmc-on-top, 8-10% per month is way too unrealistic in the long term.
I mean it can be done... when you catch a nice move and you have been a little bit more aggressive, but!!! this is in the short term! (smth like a month) and it shouldn't be repeated. (a example would have been when the market were plummeting around Lehman bankruptcy, that was a time when it was possible to make some sort of big returns with small risk but only if you were on the correct side of the market.)
But when you will hear this type of returns and he say that they can be made consistently... ignore that person!
Around 1-3% month is right and if the manager use a small risk it is a good sign.



Vark, 80% DD is... well, total unacceptable!
10-20% should be the maximum accepted DD to be sustainable in the long term.
And if he made about 20%/month this was a good sign that the manager was taking way to much risk. Because in our "capitalism world", there is NO such thing as big reward with small risk. Instead, it is a correlation between the risk and return. So, when you want big returns you also need to take additional risk.

I honestly wouldnt do a managed account, I dont trust other people with my money and just assume people are like me lol.

Just learn a few basics and only let people you trust trade for you.

If nto you are risking too loose your money.

What happens when someone withdrawal their fund during trading days and there is still open unrealized loss. Who bears such losses?

You can't withdraw more money than is required for your margin and floating losses otherwise the broker would force you to close all open positions.

Hmmm,

With a good system it is more than realistic.

I used to offer a similar service but not a managed account, simply providing calls and taking 30% of the profits.

One of my clients was a Scalper and had a £5k account, making about 40 & 100% per month and withdrew the profits monthly.

The chart below shows one of my systems, and, the Trades relate to a 100K account in less than 1 week!!

22 Minute Trade!!