Each investment carries certain amount of risk. Without risk there is no reward. Opening managed forex account is very alluring because of huge profit potential, however it’s not easy decision to trust a trader that investor has never seen before. Even if trader doesn’t have access to the funds (meaning the trader can’t physically access it nor make withdrawals), the trader has full control of trading on the account. We have very strict rules and do lengthy due diligence process for each trader. In spite of strict measures we are not able to predict future. Anything can happen and in a case that the trader runs into unexpected loss we must make sure the trader doesn’t loose more than the investor wants. Our broker is giving us the tools to control maximum amount off loss so the capital is protected and preserved.
Even if trader has successful track record, it doesn’t 100% guarantee that the performance will remain the same. Without controls in place, selected trader could get into trouble and since he is fully controlling trading activity, series of negative trades could completely kill the account so investor fully looses the capital. To prevent this from happening, our broker allows the investor to set the maximum amount of loss. This protection is called equity stop. Lets say the investor deposits $100,000 and sets the equity stop to $80,000. If trader looses more than 20% of the account, our broker closes out all positions and blocks the account so trader is not able to place anymore trades on the account. This way trader risks 20% of the account and in the event trading doesn’t go well or something bad happens on the market, 80% of the capital is preserved and the investor doesn’t fully loose his investment.
Please check the maximum drawdown of each trader. If the historical drawdown is f.e. 17%, the investor might want to put limit to risk only 20% or 30% of the capital. If the investor wants to risk 10% only, however the historical drawdown was 17%, he needs to lower coefficient (please see Performance page) what generally means he will input coefficient 0.5 and risk half less so the historical drawdown would have been just -8.5%, however profits will also be reduced by half as well.
When you check the Performance page, we work only with successful and profitable traders. However in case of unexpected events, you are given tool to preserve your capital right from the beginning to protect your initial deposit and also during full duration of investment to preserve your accumulated balance and profits.