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Automated Trading: Risks and RewardsThe futures and forex markets are loaded with automated trading systems. You can also use platforms such as Meta Trader to set up automated trades based on criteria that you choose for stocks, futures and forex. In addition, there are several online brokers that offer automated trading tools for equity investors.
We like automated trading systems because they can really help investors figure out what a winning trade is and as we said above, you don't need to be at your computer all day to trade. If you elect to use an automated platform, be sure it fits your style of trading. Don't let it overtrade or take large drawdowns and be sure to test it out in a demo account before giving the system real money to trade with.
Managed Accounts: A Great OptionYou may not be aware of managed futures accounts, so let's explain them briefly. A managed futures fund pools investor money into a variety of futures investments in an effort to generate returns that are superior to investment vehicles. Managed futures accounts often carry large minimum investments (think $25,000 or more) and as a result, are not within reach for many investors.
If you can afford that outlay of cash, you should consider a managed futures account, particularly if you want exposure to commodities, futures or forex. Since managed futures are professionally managed and are trying to outperform a variety of benchmark indexes, a good manager can provide your portfolio with some outstanding returns. Just remember managed futures accounts don't mitigate the risk of investing in the aforementioned assets, they just take the burden of doing so off of investors. Investors should also note that they want to invest in managed futures funds that are registered with the Commodities Futures Trading Commission (CFTC) and the National Futures Association (NFA).
Letting Your Broker Do The Work For YouBy signing a letter of direction or related document, you enable your broker to trade your account for you. Of course you can outline some rules and parameters that you want your broker to follow and you can even tell him you want him to buy certain stocks or assets, but for the most part, your broker is running the show. That is kind of like a managed futures account without the high minimum investment.
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