Managed Forex Accounts

This is an article by our guest writer Heather Johnson

Any forex trader who relies on more than technical analysis to pick a currency pair understands that there are a seemingly limitless number of variables that can be taken into the equation. Inflation, capital markets, real estate trends, economic indicators, interest rates, entitlements, trade, and even the weather can profoundly impact the forex markets. In addition to all of these factors, any trader who dabbles in the Dollar undoubtedly keeps abreast of US politics. It is clear that tax cuts, the popularity of the current President, and the never-ending election cycle all affect how the Dollar performs in the currency markets. However, it might be just as important to follow political developments in other countries to determine what the Dollar will do next.

As the savvy forex trader understands, the Dollar is affected by politics that stretch far beyond the borders of the United States. Changes in the politics of other countries can impact the Dollar in a similar manner to American political developments, but there are also a number of specific and unique ways that foreign politics can affect US currency. Stay abreast of the progression of events in these four areas and you will have a better idea of where the Dollar is headed.

1. Buying oil in Dollars: Traditionally, almost all major energy transactions have been conducted with the Dollar as the currency of choice. While it is still the case that most of the world still purchases oil in Dollars, there are a number of countries that have started to buck this trend in recent years. While some nations have switched to the Euro merely because it appears to be a stronger currency of late, a number of countries have dissed the Dollar for purely political reasons. Venezuela and Syria, two oil-rich nations that are no friends of the US and especially of the current administration, have started bartering for oil and conducting all cash transactions in Euros. If this trend continues, demand for the Dollar will drop significantly and the US currency will continue to be devalued.

2. The Euro flexing its muscles: Speaking of the EU’s relatively new currency, the strength of the Euro has steadily risen since its inception. The Dollar is no longer the undisputed global currency that it once was. The Euro has not only replaced the Dollar in certain energy transactions, but has also taken its place in a variety of other international operations. As the Euro continues to buff up, the Dollar looks weaker and weaker by comparison.

3. Changing foreign reserves: For decades the US has benefited from the preference that foreign countries have shown for the Dollar. Government holdings of countries worldwide have been dominated by the strong and stable Dollar for years. However, certain nations are getting nervous as the Dollar weakens and are looking to diversify. This could prove devastating to the US currency, especially if a country like China decides to liquefy its vast Dollar-dominated holdings.

4. Stabilizing and destabilizing developments: When other countries around the globe are economically and politically stable, investors show confidence in their respective currencies, encouraging diversification of assets. On the other hand, investors tend to shy away from countries that are in a state of turmoil, making the traditionally stable Dollar seem more attractive. In this way, conflict anywhere in the world can impact the Dollar in the forex markets, even if the US has no direct involvement in the altercation. This is why being a truly informed citizen of the world can not only make you a more well-rounded person, but also have a positive impact on your bottom-line.

About the author of the article:
Heather Johnson is a freelance finance and economics writer, as well as a regular contributor for CurrencyTrading.net, a site for currency trading and forex trading information. Heather welcomes comments and freelancing job inquiries at her email address heatherjohnson2323@gmail.com .

Labels: devrim, forex managed account, managed forex accounts

Devrim started trading this month since last Tuesday and has made about 3.5% so far in the 2X DEV account. Has a moderate open position by the end of Tuesday. 16 months of positive monthly return is a pretty amazing streak in forex trading. I sure hope it continues. We are excited to offer a new institutional Devrim account at MF Global.

Sentiment is still in a drawdown. SEN account is down 11% for the month now. It is down 4.3% overall since my first account started on Oct 23, 2007. Quite a few investors have given up on this managed account. The overall drawdown is still acceptable, considering its historical return. I am staying put for now, hoping for a breakout to the upside eventually, although 4 months of wait is a bit too long, I have to admit. We will have to take a longer term view on this account.

LEO has been trading carefully since the last drawdown, gaining back the losses steadily. I can definitely see a difference in his trading in that the leverage used is much lower, without the excessive averaging down. It will take some time to recover the losses, as the account is still down over 30%. Due to the asymmetrical nature of drawdown vs. profit, it is especially important to keep the losses small. A 50% drawdown requires a 100% gain to offset.

We have been testing a trader LCB since December, with a live $25K account. He traded from Dec 5-31, 2007, then Jan 22-Feb 13, 2008. The account had a gross profit of 9.18%. Observed drawdown was less than 5%. The detailed trade statement can be downloaded here. The account is currently being moved to a different broker.

Labels: devrim, forex managed account, managed forex accounts

I have been extremely busy lately, so have not been able to give account updates regularly.

Devrim did not trade again at our main broker since last update. It is not unusual for him to do this, as he trades at more than one broker and often not at the same time. He should start trading again very soon. The 2x DEV account was up close to 3% gross for Jan 2008. The performance is lower than his historical average, but it was not bad considering most forex traders performed very poorly in January.

SEN was officially down 3.86% for January. It is down about 8% for Feb as of this writing. The account has been fluctuating within a range after reaching the peak late November 2007. For a longer term perspective, my first account which started Oct 23 is down 2% overall at the moment.

LEO had a big drawdown near the end of January, revealing vulnerability in his trading strategy. The averaging down method used in his trading can lead to big drawdowns if the overall leverage is not controlled carefully. My account lost previous profits and is down 35% overall. The trader needs some major adjustments in his strategy. It will be months before this managed account is ready. Unfortunately, KAN also had a drawdown around the same time (-22% overall)and he decided to take a break in forex trading.

Watching a new program "007" closely. It seems to have decent risk management, but not showing any profit yet at the main broker in its short history there. I need more time to evaluate this one.

I started to test a new trader RGM with a small $1K account since Jan 25. He is showing excellent risk management, which is the most important thing to me. I will be posting account statement updates here.

Labels: devrim, forex managed account, managed forex accounts