The intricate, complex ways of the financial markets often confuse
the beginning traders. The two types of analysis, the different kinds
of data and their contradicting signals, the vast choice of brokers,
various trading styles, the many voices that shout buy and sell all the
time are very intimidating to those who do not possess the free time
necessary to study this field and for staying up to date with the data
releases, news, and analysis offered by the myriad media channels. At
the same time, many are intrigued by the tales of the spectacular
success in currency markets achieved by some astute traders who have
made the necessary investments and reaped the benefits. To those who
are in this predicament, the managed forex account is an exceptionally
A managed forex account allows a professional manager (or someone
who claims to be so) to trade your funds on your behalf for a salary or
a fixed share of the profits. Some trading software implement a special
feature which allows ordinary clients to act like money managers and to
trade for others while using the account structure of the broker. This
is perhaps the safest way of using a manager as it eliminates the risk
that the account manager will somehow run away with the funds. In many
other cases, an enterprising person will setup a firm advertising his
services to clients and will trade their funds on an independent basis.
This second type of manager and the dangers created by associating with
him is the subject of this article.
There are a number of advantages that a managed account offers to
the trader. Experience that can only be gained through long term
involvement in the markets is the only asset that can reduce or even
negate the large risks associated with currency trading. Since beginner
lacks such a background by definition, cooperating with a money manager
may seem to be a good choice. Emotional difficulties involved in a
trading cannot be tolerated by everyone, because each person has a
different character and some are more prone to emotional extremes than
others. Working with a money manager can also help you overcome this
problem. Lack of sufficient time is another issue that discourages
beginning traders from seriously committing to currency trading. A
full-time account manager who can devote all his energies to trading
for his clients is another positive aspect of this approach. Finally,
many online traders who act as managers provide their past records to
provide guidance on potential future returns. This knowledge may also
help the beginner in choosing the best offer for himself.
All of the above sound simple and appealing, but there are many inherent dangers that are disguised in that simple appeal.
By allowing the manager to trade on his or her behalf, the trader
does indeed benefit from the accumulated experience of that person. But
by doing so, he or she also loses the opportunity of learning in the
markets by practice and study. In essence tying his fortune to that of
the manager and thus depriving himself of the independence of mind and
the analytical mentality that is a lifelong necessity for a trading
By handing over the emotional responsibilities associated with
trading to the manager, the account owner condemns himself to perpetual
slavery to the will and skill of the manager. Since he is unable to
withstand the emotional pressures associated with trading, he can never
evaluate the market independently and can never possess the necessary
confidence to trust his own judgment. Ultimately, the manager will gain
complete confidence over his trading decisions with unpredictable and
potentially dangerous results.
Finally, while the past records of money managers can be a useful
guide on their skills and prowess, it can also be misleading. First of
all, in many cases it is not possible to evaluate these records due to
the lack of sufficient background information. It is also true that the
black box of performance data is insufficient for successfully
evaluating the trading style and method of the manager in question.
Finally, past performance is not a guide to future results: A past
record of positive returns does not guarantee a similar performance in
In general, remaining in control of your account and trading to gain
experience, by risking small amounts and using very low leverage is
usually a better idea than handing over the control of your account to
a stranger. It is difficult to predict how reliable a person is on the
basis of the brief communication preceding the opening of an account or
the signing of a contract. One will often need years of experience in
order to feel safe about the character of such a partner, but in
today’s dangerous environment, it is always possible that an unexpected
misfortune that will erase his savings in a short time will remove the
We do not claim that all managers are fraudsters, of course, but it
is imperative that you perform the necessary background check. Ask for
the required licenses and certifications before deciding on who you
will entrust with the management of your wealth. In order to clarify
the dangers involved, we will list a few of the scams and thefts
perpetrated by self-professed managers in the past few years.
Managers and Scams
We believe that the discussion above already makes it possible to
visualize the great “profit” potential of the scammer who acts in the
cloak of a money manager. The nature of the relationship between the
manager and his client ensures that a degree of blind trust must be
maintained between the two parties, since it is not possible to check
the actions of the manager constantly. Furthermore, by definition the
manager needs a degree of independence about the way he uses the funds
at his disposal, in order to be able to make profits and to manage the
risk of the account successfully. In a healthy relationship, none of
those would be considered an excessive requirement, however, when the
manager’s main aim is mismanagement and misappropriations, the
principles of the relationship become dangerous and harmful for the
client. Visit our agencies to contact article to report any scams or fraudulent behavior by account managers.
Richard Matthews JR.
This gentleman founded the White Pines Trust Corporation in San
Diego, California in July 2000. Talkative and persuasive, Mr. Matthews
was an able marketer in spite of his lack of understanding in the
currency trading business. Through various schemes, promises and profit
pledges, he was able to pool more than $30 million of client deposits
into his pockets, which he then used to acquire a 12-acre island off
the coast of Belize.
During the most active period of the White Pines Trust Corporation
and its associated Pinnacle Capital Fund, Mr. Matthews claimed an
eight-year cumulative return of 591%, while guaranteeing that 75% of
customer deposits are protected from loss each month by the use of
various complicated but false methods, as eventually confessed by Mr.
Matthews himself. Eventually, when he was deprived of his island and
other luxurious possessions in order to repay his defrauded customers
some $14.8 million, much of which was of course unreachable, having
been spent squandered during the heyday of his once great career.
In proof that a successful life in forex fraud doesn’t require any
stellar diploma from a university or years of proven experience.
Russell Cline began his meteoric career as a house painter in Baker
City, Oregon. Through a dashing, confident attitude to life in general
and the audacity provided by his utter lack of knowledge or
understanding of the forex market, he was able to lie persuasively by
offering his clients risk-free managed accounts facilitated by his
sophisticated trading techniques.
After netting around $27 million from 600 clients between 1998 and
2002, Mr. Cline declared that he had lost 97% of the funds, blaming his
failure on faulty but honest trading errors. He requested additional
funds to continue his rising career as a forex fund manager.
To cut a long story short, it was eventually discovered that he had
spent all the client funds on private jets, real estate, boats, luxury
cars and pornography. He was sentenced to 8 years and 1 month in prison
and was ordered to pay $14.9 million in restitution to clients.
Joel N. Ward
We have discussed the interesting career of Joel N. Ward in the section on Forex HYIP,
but to prove how worthless the words and the assumed character of these
fraudsters can be, we will just repeat here that this convicted
fraudster would sometimes appear on the most reputable financial news
channels and newspapers to discuss the ethics of retail forex brokerage
and how irrational the expectations of trades were.
Ultimately, you're free to do whatever you want with your own money.
You are free to turn each penny to thousands of dollars but you're also
free to turn your millions or thousands to pennies or nothing, if that
is your desire. Our hope is to remind you here that the promises,
pledges and claims of account managers are of little value unless they
are corroborated by information from independent sources, such as
regulatory bodies and government authorities. But even in those cases
where the reliability and honesty of the manager is not in doubt it may
still be a better idea to trade your funds yourself, so as to exercise
maximum control over your future and the safety of your assets. But
whatever you do, never act on the basis of extravagant promises made by
someone recommended to you by friends or relatives. Be diligent and
responsible about whom you entrust your assets to. Isn't the necessity
of that obvious?
Visit our forex broker review page to read extensive analysis on the best, honest and fraud free forex brokers available to trade currencies with.