I may receive a referral reward if you sign up through my link. It costs you nothing extra.
Disclosure: I may receive a referral reward from High Capital Group if you become a client through my link. It costs you nothing extra.
There are three common ways to put money behind a trader's skills, and people mix them up constantly: a managed account, copy trading and trading it yourself. Each gives you a different mix of control, effort, cost and risk. Here is a fair comparison of the three, with High Capital Group's copy trading service as the example for the middle one, and with the points where each of the other two can beat it.
You pick the currency pairs, you decide when to enter and exit, and you accept every result. The strongest argument for doing it yourself is control and cost. You pay no performance fee to anyone, and every decision is yours, which suits people who enjoy the work.
The weaknesses are time and experience. Forex markets run around the clock from Monday morning in Australia until Friday afternoon in New York, and learning to trade them well takes a long time, usually with losses along the way. If you want to trade yourself, nothing here should talk you out of it, but be honest about how many hours a week you will spend and how much a beginner's mistakes could cost.
In a typical managed account arrangement, you hand an account manager the authority to trade for you, and they decide what to buy and sell. The details vary a great deal from one provider to another. Some keep your money in an account in your name, others pool it. Fees may include a management charge, a performance charge or both, and minimum deposits are often much higher than for copy trading.
The advantage is that a professional makes every decision, and there is nothing for you to set up. The things to ask about are the same wherever you look: who holds the money, who can withdraw, how fees are calculated, how the record is verified and how you get out. Because the arrangements differ so much, get the answers in writing before you commit.
Copy trading sits between the two. A professional trader makes the decisions, and you keep an account in your own name where the trades are mirrored automatically. In the High Capital Group version, you open your own account with a highly reputable, regulated forex broker, deposit with the broker, and set the account up to mirror the head trader, Norman Hart. The company has no access to withdraw money. You can set a personalised risk level, and you can access your money whenever you wish through the broker.
The costs are 30% of profits, payable only after you make money and calculated on a high water mark, with nothing upfront. The copy software normally costs US$19 a month, and the recommended broker covers that for life if you join through the company's link. The minimum is US$1,000, and the account needs leverage of at least 30:1.
You do when you trade yourself. A manager does in a managed account. The lead trader does in copy trading, although you decide whether to follow and how much risk to run.
When you trade yourself, your broker holds it. In copy trading with High Capital Group, your broker holds it, in your own account, and the company cannot withdraw. In a managed account it depends on the provider, which is exactly why the question has to be asked.
Trading yourself takes the most, and copy trading takes the least once the account is set up. Managed accounts also take little of your time, though you may have more paperwork at the start.
Trading yourself has no performance fee, only the broker's costs. Copy trading here has a performance fee of 30% of profits after the high water mark. Managed accounts vary, and some charge both a management and a performance fee.
Your own records are the only thing you need when you trade yourself. For copy trading with High Capital Group, the record is verified in real time by FX Blue, and you can view it on the Past Performance page. For managed accounts, ask what independent verification exists.
All three can lose money. Trading yourself adds the risk of your own inexperience. Managed accounts add the risk of the arrangement itself, depending on where your money sits. Copy trading adds the risk that the lead trader has a poor stretch, and the leverage requirement of at least 30:1 raises risk in this particular service.
The company states a target monthly return of 10% after fees and a target maximum drawdown below 15.0%, and reports one losing quarter out of 33 with a profit factor of 4.99. Results before 2018 came from the old legacy system, and the current system's record starts in 2018. These are the company's published figures. Past performance is not a guarantee of future results, and targets can be missed.
If you love markets and have the hours, trade yourself and keep the whole result. If you want a professional deciding for you and you are comfortable with the provider's arrangement, ask the managed account questions above and compare. If you want a professional's trades without giving anyone access to your money, and you like the idea of staying in control of the risk dial, copy trading is worth a look. You can also combine the approaches, for example by copying a service with a small portion of money while you learn to trade on a separate account.
The company's FAQ notes that you can open a sub-account with the same broker for your own trading, which it prefers over placing your own trades on the copied account. The FAQ page has the details, and the forex 101 page helps if you are new to currencies.
No approach is right for everyone, and none of them is free of the chance of loss. Pick the one whose trade-offs you understand and can live with.
Risk warning: past performance is not a guarantee of future results. Forex trading carries risk and you can lose money. Only invest money you can afford to lose. Client money is held by a regulated broker in the client's own account.
Forex trading carries risk and you can lose money. The return and drawdown figures are targets, not promises, and past performance is not a guarantee of future results. Your money is held in your own account with a regulated broker. Only invest money you can afford to lose.