I recently sent an email to our members asking 
those currently managing funds or those
looking to do so to contact me. The responses
were interesting in that a large majority of
respondents expressed an interest in becoming
fund managers.
This got me thinking about how I could guide
those looking to manage funds and what it
takes to become a forex asset manager. In this
article, the focus will be on how a trader can
become a money manager and the various
ways to build capital to trade
Build a track record
To establish credibility, a prospective money
manager needs to build an audited or verifiable
track record. At a minimum, I would say a trader
needs to have a track record that spans at least
2 years and to be taken seriously, at least 5
years trade history would probably be needed.
This does not mean a trader cannot raise funds
to trade with a shorter track record, but it will
likely be more difficult using traditional methods.
Typical Ways to Get Started
Managed Forex Account – A managed forex
account is one where a trader or money
manager has the authority to make trades on
behalf of a client. In return, the money manager
receives a fee, generally based on a
percentage of the profits. New money
managers often start out with one managed
forex account and then try to build more capital
to trade based on the account’s performance.
Pamm Manager – Rather than trade each
managed account individually, a Pamm
Manager will treat capital under management
as a pool and allocate trades to each investor’s
individual account based on his/her percentage
of the total. Similar to individual managed
accounts, the client gives a Limited Power of
Attorney to the money manager to trade his/her
account while agreeing to assume the risks
associated with the forex trades being
executed. In addition, the money manager is
compensated by the client, generally in the form
of a performance fee based on the net profits
from trading the account.
A slow process
As you can imagine, getting started as a forex
asset manager can be a slow process. First,
you need to raise capital to trade, generally in
the form of a managed account. You then need
to build a track record and to scale your efforts
will likely take at least 2 years, perhaps
longer.to build a track record so you can raise
serious capital.
A money manager can raise funds to trade
directly or from a third party. The former will
take time away from trading while the latter will
ask for compensation. This would mean either
giving away part of the performance fee or if the
money raiser asks for a rebate from adding on
to the spread, the higher cost of trading would
impact the overall performance.
Is there an easier way to get started?
While the word easy is not in my trading
dictionary, there is an alternative way to get
started managing money to trade. It is by
becoming a copy trader.
Social vs. copy trading
You may see the terms social trading and copy
trading treated the same but there is a
difference. Copy trading is considered part or a
subset of social trading.
In social trading, trading information from other
traders is shared and it is up to the individual
what to do with it. The user can treat it as
information and/or decide whether to use it to
execute his or her trades In this case, the user
makes his/her own trading decisions.
Copy trading, on the other hand, is when a user
copies the trades of a trader he/she sees in a
social trading exchange. This is done by linking
the account with that of the copy trader So,
whatever trades the copy trader enters are the
trades those copying will see in their accounts.
Compensation may vary between platforms but
in any case, copy traders can benefit from
positive performance.
What does this mean for a money manager?
For those looking to get started, being a copy
trader allows you to act as a money manager,
build a track record and attract capital to trade.
If successful trading, the broker may have a
program where it helps you raise capital by
elevating your status to a higher level.
Pros and cons
There are pros and cons to this approach as
those copying you do not have a commitment
as it depends on not only your performance but
competition from others on the social trading
exchange.
On the other hand, being a copy trader is a way
to not only benefit financially but to gain
experience, build a following and attract
attention as a professional forex money
manager.
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