An managed forex account is a good way for an investor to diversify his portfolio. After the crash of 2008 many investors are searching to balance their portfolios. In 2008 the prices of all assets collapsed concurrently. Investors are looking for new solutions to balance portfolios. Currencies make the perfect choice as they are less volatile than other assets. I have included in the following paragraphs several ways to rate the forex funds.
The Criteria On How To Rate An Managed Forex Account
Annual Return
You will observe the various monthly return rates and miss the overall important figure for the annual return. You need to be happy with the annual return rate.
Average Win / Loss
There is any old trading rule that your winners should be twice as profitable as your losses. The average win should typically be twice as big as the average loss.
Max Peak to Valley
We need to see what the maximum draw down is and if we could live with the results. Some experienced traders can experience a draw down of 30% as they recognize that this is the nature of the system. Some people would be horrified to see a draw down of 30%.
Correlation with S & P
If a large proportion of your money is in the stock market it can pay to have a strong negative correlation with the S & P. If the stock market goes down, it is then likely that your investment will increase. This helps to balance your portfolio.
Slippage
The results from a lot of systems do not take account of slippage. This is very important if you are trying to trade this system yourself or automatically. You might be unable to get into the market as the original system as a result of timing differences. You could have different brokers than the original system.
Sharpe Ratio
The sharpe ratio is a way of measuring the risk premium. Typically we would like to compare the performance of the fund against a risk-free investment. The higher the sharpe ratio the less risk there is in the investment. We need to be cautious with the inputs for this ratio. For instance a profits fund will have a high sharpe ratio as the profits are reinvested each year. We should really compare the performance of the fund in the year without any profits reinvested.
There are a number of ways in which we can compare the performance of an managed forex account. The primary consideration is just how much do we trust the system. We must see a minimum of couple of years data to satisfy ourselves that the system can function. We should also note that the managed forex account or managed fund or system is properly regulated.