How do you identify reliable Forex fund manager? Since there are so many fake traders, how do you spot a Forex fund manager scam?
14 July, AtoZForex - Although, financial markets are straight forward with three possible market movements, they are also very risky. Trading Forex indeed carries more risk than most other traditional investment methods. It could also be much more stressful if you are investing the money that has direct impact in your livelihood.
But what makes Forex market appealing to many new traders is the spectacular success tales in currency markets. Surely there are many success stories out there, but they will not be the ones sharing their pictures next to a "Ferrari which they don’t own". These scumbag “traders” know that there are many people hoping to change their lives and they are after those dreams, hunting on your greed. Most don’t even have 6 months worth trading experience. However, they are very good at painting a good picture and attracting traders under their Forex Fund Manager Scams.
So how do you determine that your Forex Fund Manager is a Scam? How to spot a Forex Fund manager scam in 2 steps will help you to distinguish definite scam from possible scam in two questions:
Forex Fund Manager Scam: conflict of interest
A reliable Forex Fund Manager has only one purpose, to make money for the investor and receive a 20-30% profit share that is it!
A scam Forex Fund Manager has only one purpose too, to make as much money as possible for himself from as many different sources as possible.
The biggest conflict of interest appears when your Forex Fund Manager asks you to open an account with a broker that he has selected with a specific referral link. You may be wondering where is the conflict of interest there? The following is a great example of fund manager conflict of interest:
Once your fund manager gets your funds under a certain link that he has selected, it is likely that he has a contract with a broker. Often this broker would not even be a reliable Forex Broker, but one paying good commission. With this broker he will be receiving return for every position he opens, whether he loses or wins, does not matter. So, this fund manager will be opening as much positions as possible in order to receive commission from the broker. Now imagine that your fund manager is being paid $10 per each lot he trades and he can open with 1:500 leverage and $1000 account as much as 5 lots at a time. Do you think that he will care about your account? Each position he would open, he will be making $50 from the broker which is 5% of your account.
How do you make sure that your fund manager doesn't have a conflict of interest?
Never open an account under the fund manager’s referred broker. Ask what type of account your fund manager requires to trade for you. Select a reliable Forex Broker offering such account types. Sign an agreement with your fund manager and only then give your access details to your fund manager.
What is the average return per month?
Yes, you want to make your account grow as much as possible, I understand. However 100% grow in one entry indicates that your fund manager is hedging two accounts against each other. There is no money management technique involved, indeed he does not care neither.
Even the hedge funds do not do 100% return in a year, yet you expect your back street boy to give you 100% extra return in just a week?
Double up account is the most common Forex Scam in the industry. Since the market can go up or down. Theoretically speaking buying the same trading instrument on one account and selling it on another account will make you lose one account and double the other account. Scam Forex Fund Managers understand this very well. All they need is to have two investors giving them $5,000 accounts each. Following step is to sign 50% profit share agreement with each investor.
Hedging Forex Scam structure
- Fund manager finds two investors with $5,000 investment each (Victim A and Victim B)
- Sign 50% profit share with each investor.
- Fund manager does not care about neither clients, he knows he already made $2,500.
- In one day, he will open buy order on Victim A’s account and Sell order on Victim B’s account
- Victim A’s account will stop out, Victim B’s account will double up
- Victim A is pissed, but the fund manager says, sorry the market just went crazy, I could not do anything
- Victim B is happy his $5,000 has doubled up
- Fund manager right away requests Victim B to pay him $2,500
What happened above is a simple way of robbing traders. This fund manager actually shared Victim A’s $5,000 with Victim B. But of course Victim A does not know about it.
So, how do you determine that your fund manager is hedging accounts?
Ask your fund manager to give you more than 3-4 success examples. Check the details of the statements. If you see the accounts being doubled with a few entries do not proceed with that fund manager. He is a scam fund manager!
How to spot a Forex Fund manager scam in 2 steps is an extract from my upcoming “Forex Not For Dummies” trader’s journey book.