Forex trading is legal and popular in the UK, but it is also a fairly complex and inherently risky form of trading. It is, therefore, unsurprising that many traders try to find ways to mitigate the risk and make forex trading easier. Many UK forex traders use one specific strategy, which is to use a managed forex account.
When it comes to managed forex accounts UK brokers have a range of options on offer, so it’s important that traders know what they’re doing and what to look for. Today we’re going to look at managed forex accounts in the UK and answer some questions you may have about them. We’ll also look at some of the best managed forex accounts in the UK, so you have a starting point if you decide that this type of account is right for you.
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What Are Managed Forex Accounts?
First of all, let’s look at what managed forex accounts are. They are broker accounts that retail traders set up and fund, but that are managed by a professional trader who is paid a fee for the service they are providing. The account manager is the one who makes decisions regarding which currencies to buy and sell, and when. As a trader with a managed forex account, your manager is using your money, to trade on your behalf. There are different types of managed accounts and it’s important to understand the differences in order to choose the right type of account for your needs.
An Individual Account is a trading account that you set up at a broker, in your name, exactly as you might any other forex account. However, this account will be pretty much “hands off”. Your account manager will run it and make decisions on when to enter and exit trades. Individual accounts usually come with a fairly high minimum deposit, often of $10,000 or more, along with relatively high fees which you will agree to at the time of account set-up.
You don’t have a lot of control over managed forex accounts, but with an individual account, you will at least have a direct relationship with your manager. You will be able to set out your trading objectives and request that they use specific trading techniques or focus on specific currency pairs.
PAMM, MAM and LAMM Accounts
Many traders decide to use a pooled account, rather than an individual account. This means a group of investors pool their funds together and share a single account manager. They also share the profits from that account, depending on the amount they invested. These accounts can be found at many UK brokers, and there are a few different types to choose from.
- A PAMM account is a Percent Allocation Management Module. Each investor in the PAMM has their own ratio depending on the trading volume, and the trading profits are shared between the investors based on the percentage of the account made up by their funds.
- A LAMM account is a Lot Allocation Management Module that is based on lot trading and involves clients’ accounts increasing automatically by one standard lot each time the manager purchases a standard lot.
- A MAM account refers to a Multi Account Manager, and the managers of such accounts are able to assign higher leverage and create specific sub-accounts.
Each account type involves a manager trading on behalf of the investors, but it should not be assumed that this is a “set it and forget it” type of system. Investors should still monitor their accounts and make sure that the fund is meeting their trading objectives.
With managed forex accounts, UK brokers offer the benefits of a professional trader, and the investors have the peace of mind of knowing someone else is trading for them and is very motivated to make a profit. Managed forex accounts still carry risks, however. A sudden downturn in the markets can negatively impact your portfolio, so never assume this is a fail-safe form of investing.
The Best Managed Forex Accounts in the UK
The managed forex accounts UK brokers provide are many and varied, so it can be hard to find the exact right option for you. To make it easier, take a look at our list of the best managed forex accounts for UK traders.
|Broker||Features||Min Deposit||EURUSD Spread|
|72% of retail CFD accounts lose money. US Clients: No Regulated : Yes||
– Ultra-fast execution from 0.2s
|$100||from 0.0 pips||
Sign Up Your capital is at risk
|Your capital is at risk US Clients: No Regulated : Yes||
– 40% New Member Bonus
Sign Up Europe* CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
|Between 74-89 % of retail investor accounts lose money when trading CFDs US Clients: No Regulated : Yes||
||$200||NDD 0.09 / Standard 0.69||
Sign Up Between 74-89 % of retail investor accounts lose money when trading CFDs
|Your capital is at risk US Clients: No Regulated : Yes||
– CySEC, FCA, FSCA, SCB Regulated
The Benefits of Managed Forex Accounts
One significant advantage of any kind of managed forex account is that you have the services of a trading professional, who will generally have a lot more knowledge of the forex markets and experience in making profitable trades than you have. That means managed forex accounts usually make it easier for newer and less experienced traders to make a profit. A managed forex account saves you the time you would spend trading and reduces the stress involved. It also means you can get started quickly rather than having to commit to a long preparation phase as you learn forex trading techniques and strategies.
When you invest in a PAMM, LAMM or MAM account through your broker, there is generally a high level of transparency, and you will be protected by the fact that UK brokers must be regulated and overseen by the Financial Conduct Authority (FCA). For this reason, you should consider only using individual accounts offered via a broker as well, though you may find independent advisors sometimes offer these services. Another advantage of pooled accounts, as opposed to individual accounts, is that they tend to require a much lower minimum deposit and do not have long “lock-up” periods.
The Drawbacks of Managed Forex Accounts
One issue that some traders have with managed forex accounts is that by using one, you will miss out on gaining the experience you need to trade successfully on your own, which is the ultimate aim of most forex traders. There are also significant fees involved with managed forex accounts which most see as a disadvantage. However, some would argue that managed forex accounts tend to produce higher profits, especially when compared to the profits of brand-new traders, so this will often cancel out any fees.
It should also be remembered that while your forex account manager will be a professional with good knowledge and trading skills, some traders will argue that even a professional does not care as much about your portfolio as you do yourself. Managers have an incentive to trade successfully with other people’s money but may be less committed and motivated as an individual trader using their own cash. They may, for example, be less likely to take a potentially very profitable risk, because of having a pool of investors to answer to.
Avoid Managed Forex Account Scams
As most forex traders are aware, there are various forex trading scams that you really need to watch out for, and managed forex account scams are one. This is why it is advisable to always find managed forex account services through a licensed and regulated brokerage that is based in the UK, or authorised to operate there, and is overseen by the FCA.
Scammers tend to hang out in forex trading forums online in the hope of tempting inexperienced traders to sign up to their fraudulent and unlicensed managed forex account schemes. They often operate on social media, specifically targeting individuals who have asked questions about getting started in forex trading and may claim they are an individual who can trade on your behalf, without needing to be licensed. That is untrue. Anyone offering to trade on your behalf, whether a broker or an individual, needs to be licensed to offer such services in the UK.
To avoid these scams always do your research and stick with reputable brokers when choosing a managed forex account. Check any proof of past results carefully and be very wary of anyone offering guaranteed or unrealistic results. Reputable managers ensure you are aware of the risk involved in forex trading and will tend to offer evidence of their past results, while also informing you that these are no guarantee of future performance.
Managed forex accounts can be a great option for beginner forex traders, enabling them to get started without having to spend a huge amount of time and effort on obtaining all the knowledge and education needed to run their forex trading account.
New traders should, however, understand how managed forex accounts work, and the pros and cons of each type of account. Only sign up with a trustworthy and regulated broker, and always be wary of the many scammers out there. Also, do not be tempted to “set it and forget it” and completely ignore your portfolio. Monitoring your managed forex account will help you stay on top of things and decide if this really is the best option for you in the long term.