1 place in the rating! Free trading training!
Foreign currencies have increasingly become a compelling investment product with a daily turnover of $6.6 trillion. Accompanied by an annual surge in new accounts is the growing popularity of forex trader recruitment. Is this action legal? Are there any motivations behind this recruitment? The answers will be found in this article.
Brief Explanation of Trader Recruitment
Forex trader recruitment means getting someone – albeit seasoned or inexperienced – involved in the trading business. So, there are two common cases in the forex market as follows:
- You Are a Recruiter:
Although forex trading is a compelling investment channel, not all speculative traders have enough capabilities or time to enter the forex game. That is why apart from the wealth of traders making a decision themselves, some opt for hiring other experienced fellows to trade on their behalf.
- You Are Recruited:
Provided you are a savvy trader and want to diversify streams of income, you may promote yourself to potential clients who have no time for complicated trading activities in forex.
Besides, you can work for reputable financial companies as a qualified portfolio manager, an affiliate or a promoter. Those organisations think that recruiting more traders will bring better fund allocation and potentially greater incomes, not to mention that affiliate programmes can help them reach more prospective customers.
However, apart from those trying to build a fair trading environment, there are various fraudulent multi-level marketing (MLM) firms intentionally luring novices to the market. The crux of this business model is you have to submit them a certain deposit amount as a subscription fee and are promised to receive bonuses based on the number of new clients you involve in the company. This pyramid scheme is not illegal but there is no denying that it is manipulated for criminal purposes.
1 place in the rating! Free trading training!
In this article, we only mention the first circumstance when you recruit someone as a representative of your trading business in the market.
Where Can Forex Traders Recruit Other Traders?
If you wonder whether forex traders can authorise other peers to trade on their behalf, the answer is definitely yes. Hiring other forex traders is neither illegal nor unethical. There are no restrictions on having someone to represent you in forex or any financial markets. It is like a business owner outsources his or her advertising campaigns rather than using the in-house staff.
There are many ways in which you can reach an expert forex trader. Each accompanies pros and cons. Thus, it is needed to find out which one best suits your investment goals and financial status.
Provided you wish to find an expert forex trader working independently of financial institutions, you may visit freelance networking sites such as Upwork or Fiverr. All essential information about professionals in this realm is publicly posted in their profile, entailing their field of expertise, years of experience, hourly rate, work history and even feedback from previous or existing clients.
Several brokers provide clients with a full range of financial services, such as portfolio management, retirement plans, access to IPO stocks, tax planning and so forth. Those brokerage companies will assign a financial advisor to take care of all investment jobs on your behalf, even involving financial consultancy and research. In turn, you have to pay a far higher commission for what you are serviced by full-service brokers than discount online companies.
PAMM, short for Percentage Allocation Money Management or Percentage Allocation Management Module, is a prevalent form of using pooled money to trade forex. Three major participants in PAMM transactions include a forex brokerage firm, experienced money managers (or qualified traders) and investors.
Accordingly, an investor will allot the desired percentage of their financial resource to the chosen or assigned money manager. This financial expert often concentrates capital from different investors on a common pool and then makes investments to generate profits. Qualified traders or money managers may simultaneously administer various forex trading accounts.
Meanwhile, the brokerage offers a safe trading platform, facilitates trading and non-trading activities of both money managers and investors. More noticeably, there are transparent, fair mechanisms for both parties to review their performance, select and communicate with each other.
Using a PAMM account, you implicitly agree to place your money at risk and hardly choose your favourite investment products. In other words, your selected money manager will apply his own trading strategy in suitable financial offerings within a certain time.
Other Managed Accounts
If you would like to look at managed accounts other than PAMM ones, you may go to mutual funds, hedge funds and exchange-traded funds (ETFs) which offer services in the forex market.
As the name states, those accounts are under your ownership but monitored by forex experts. They employ a similar procedure to PAMM accounts, but still, show slight differences depending on their types. They may be divided into two categories: passively and actively managed accounts. Besides, in a published guide by Financial Standard, an Australian publishing department of Rainmaker Group, those accounts may come into two main varieties, namely individually managed accounts (IMAs) and separately managed accounts (SMAs).
Like PAMM accounts, those holding managed accounts provided by assorted funds will be charged a portion of their profits and commissions as well for trading services.
Why do Forex Traders Recruit Other Traders?
Despite the ever-growing interest in forex trading, not all investors may engage in the fray themselves. Two major causes behind the act of having somebody manage their accounts derive from a lower possibility of losses and the shortage of time as well as experience to deal with market movements.
Lack of Experience and Time
People are always encouraged to do what they excel at instead of rushing to the realms they have no expertise in. Having said that, such side hustles as forex trading are like a delicious piece of cake that people cannot ignore due to its massive benefits like deregulation, higher liquidity or lower commissions than that of other financial products. Rather than being a month to a flame, they approach a talent pool in this realm and recruit a compatible trader or manager to execute currency transactions on their behalf.
Besides, various investors, mostly the high-net-worth, find it time-wasting to learn about a possible new sphere whilst expressing fears about an extremely high washout rate owing to their inability and ignorance of handling unpredictable price fluctuations.
In turn, they can focus on their core businesses to make handsome profits and use such money to reinvest in the foreign exchange market with the full assistance of high-qualified traders.
Lower Risks of Failure
Inevitably, nothing ensures professional portfolio managers will always obtain winning trades. This is because the market is sometimes profoundly impacted by unexpected events and consequently moves in an unfavourable direction. Meanwhile, even the greatest traders occasionally give inaccurate predictions and then confront crippling losses.
However, the failure rate faced by a professional manager is much lower than by most novices. Their expertise and experience might help them determine which currency pairs should be traded this time, how to control risks and even anticipate potential news that has a heavy toll on price actions. By comparison, a newcomer’s poor preparation in terms of knowledge and finance can increase the likelihood of losing money and worsen their possible failures.
What’s more, trading forex unsurprisingly comes with pressures that may lead to false judgements at times. Therefore, having the seasoned do this daunting job is a better option to reduce a washout rate.
Basic Guides to Recruit a Reputable Trader
The deregulation of forex, paired with the flourishing of online trading activities, opens more avenues for scammers to show up and set a trap on rookie traders. Here are some essential rules you should memorise to find a reliable, compatible partner in the forex market.
- Check Their Legitimacy
No matter whether you cooperate with an independent forex expert or a portfolio manager from a financial company, it is essential to determine whether that person is legitimate and qualified. Moving forward, you should look at their qualifications, CVs and past performances that talk about return rates on their investment, amount of managed money, numbers of involved investors as well as reviews about their work. Additionally, you can use rating systems in freelance working sites and the brokerage’s website to see how qualified traders or money managers are judged.
Prestigious job sites and brokerages sometimes cannot supervise all trading performances of their members. It comes as no surprise that fraudulent activities are undeniable. So, you need to learn whether those organisations have any client protection mechanism if their members or employees commit financial crimes.
- Track the Investment Progress Regularly
Having someone represent you in the forex market does not mean you need not keep an eye on this realm. Taking forex trading as an ordinary business, you should regularly check how the investment has advanced and how the portfolio manager administers your forex trading account or uses your capital. This helps you identify cash inflows and outflows over a specified period.
In addition, you should arm yourself with some certain knowledge about forex trading and have a frequent discussion with the qualified trader to know whether his or her investment decisions this time are accurate.
1 place in the rating! Free trading training!