Managed accounts (like PAMM and MAM) are different from other trading accounts because a professional forex manager maintains this type of account, making trading decisions on your behalf. While you learn the ropes on how to become a profitable trader, you can still make money through a managed account without missing out on any trading opportunities.

However, the success you get from a managed account depends on several factors – the biggest of all is the money manager who trades with your money. If you want to sign up for a managed account, below are the things you should know.

1)  What are managed forex accounts?

Unlike other trading accounts, where traders open and close their trades on their own, managed accounts allow expert traders to make trading decisions. The signup process is the same for these accounts: you choose the broker who provides managed account services, open a managed account, choose a manager of your choice,  and start investing the money you would like him/her to trade.

The biggest misconception that people have about managed accounts is that managers control their accounts completely. No! The manager’s access is limited – he/she will have only the control you allow, though there might be some restrictions depending on your account type. For example, trading strategy is a critical component of a trade’s success in managers’ hands. You can not expect it to be implemented your way.

If selected with proper research, your money manager will help you achieve the returns you expect. You need to pay attention to a few things when choosing your money manager.

• Though the previous trading results do not determine how successful future traders will be, an excellent trading record gives you a surety that your money is in safe hands. So, always pick a money manager who has a high win rate.
  
• Forex managers would charge a commission on trading on your behalf. This is different from broker to broker. So make sure you have a budget set out, as it could be heavy on your pockets if you choose the wrong forex manager.

2) What are the different types of managed accounts?

There are different ways you can go about choosing a managed account. Below are the three most commonly managed accounts you will see in the forex market.

1) Individually managed accounts: As the name implies, these accounts are designed for only you or one investor. There is no pool investment/multiple investors, which is the case with other account types. Since you are the sole investor, these accounts are also a high investment to get started. The average cost is $10,000, and it could go higher or lower depending on the type of manager you choose.

2) PAMM accounts: Percent Allocation Management Module accounts, preferably called PAMM accounts, come under a pool trading account where multiple investors invest on a percentage basis. Giving managers a huge trading volume from different investors, PAMM accounts require less investment. After trades are made, the profits are shared among investors based on the percentage of money each invested.

3) MAMM accounts: These trading accounts are also a type of pooled account, but there is one difference: they allow forex managers to have control over all the sub-accounts, giving them more flexibility on how to trade. So, if investors instruct forex managers to take up higher leverage, they can accept their request and increase the leverage in all accounts.

MAMM accounts are riskier than the other two trading accounts; thus, you need to have an understanding of the market before using them.

3) Who can use a managed account?

If you fall under any of the three categories, managed forex accounts are for you –

1)  You are a trader with a full-time job: If you have a full-time job and do not have time to trade, you should try managed accounts. With technology at your disposal, you can keep track of your trades with the help of mobile trading.

2) You are new to trading: Managed accounts are also for new traders who have yet to acquire the skills to become proficient traders. They may enter some trades once in a while, but they lack consistency in their results. However, if your motive is to become a full-time trader in the long run, then you should consider managed accounts as one of the ways to become a profitable trader.

You can use a managed account as a resource for getting better as a trader. Start by understanding how money managers implement their strategies. What risks do they take? What strategy do they implement? After analysing their trading style, you can implement a similar strategy on a demo account. Be open to making adjustments to it. Because of their risk-free environment, a demo account could help you test your trading strategy multiple times.   

3) If trading psychology is not your strong suit: Not all traders can keep calm and cool when trading. And if you are someone who falls into this category, consider giving the charge of your trades to someone who can. Forex money managers have years of experience, nurturing them into patient traders. 

Conclusion

If you do not have the time or skills to trade forex, then managed accounts can be an alternative way for you to make money. Forex money managers have acquired the skills through practice; they understand what strategies to use and when. However, not all money managers are perfect. As traders, everyone, experienced or new, can lose against the market. Forex money managers will, too, lose. So, you will never find a perfect manager – with zero losses. You have to pick a manager who is right for you. It is a good strategy to allocate your investment to different money managers, as this divides your risk and safeguards your capital because if one manager loses a trade, you might still make some gains because of others.