There is no right or wrong choice when it comes to choosing a path for your trading. Some people are content to rely on periodic statements to monitor their investment. Others want access to market-to-market performance. Some are sensitive to daily equity swings, while others take a long-term view of performance. Here are five of the most popular vehicles in new technology available to passive futures and forex traders:
- CTA Managed Accounts – Participating in a managed program puts your account under the discretionary control of a Commodity Trading Advisor (CTA) registered with the Commodity Futures Trading Commission. These professionals typically charge “2 and 20” – a 2% annual management fee and 20% of profits over well-defined high-water marks. These accounts require initial investments ranging from $10,000 to $1 million or more. There are Managed Accounts of every stripe: single-product, sector and diversified Managed Accounts. Never invest before reviewing the CTA’s track record.
- CPO Managed Pools – In a commodity pool, the investor pools his funds with the funds of other investors and receives proportionate share ownership of the fund in return. Registered pool operators may manage the fund themselves or hire CTAs to direct trading. In some instances, commodity pools can provide retail investors with access to products that are generally available only to large investors. Fees similar to managed accounts typically apply, and as with managed accounts, it’s crucial to review the pool’s track record before investing.
- System Tracking – If you think there are a lot of funds and pools to review, wait until you investigate the landscape of automated systems. There are a zillion to choose from! One popular site currently has 58,000 strategies you can follow. In these environments, traders typically open an account with a broker whose platform is integrated with the system provider and pay a monthly subscription fee to follow the system signals. In some cases, you can purchase a system from the developer and run it on your own trading computer. Unfortunately with either of these approaches, you will generally need to rely on hypothetical performance data when choosing a system, and this data must be taken with a grain of salt.
- Broker Assist – Some traders like the “broker-assist” method, in which they have the opportunity to consult with a licensed broker who may provide guidance or have a “trade of the day” suggestion. In this scenario, the trader stays in control but relies in part on the experience and expertise of his broker. Of course, expect to pay a higher commission rate for this service, and work only with a trusted or recommended broker. Make sure to check out the broker’s credentials and regulatory history using the National Futures Association’s BASIC (Background Affiliation Status Information Center) tool.
- Leader-Follower – A Leader-Follower autotrade service has some unique features. Currently, this category is specific to WorldCupAdvisor.com, because it’s the only source that allows investors to mirror the actual trading of professionals who have their own money on the line. Essentially, the lead traders (or “advisors”) sink or swim with their followers. This model requires a subscription fee only and facilitates easy in-and-out (investors can start and stop any of the 15+ available programs with a phone call to an authorized broker). These programs are easy to evaluate because WCA makes available complete track records and detailed performance reports for each program. Subscribers can track market-to-market performance of the lead trader on the WCA site. The advisory staff is filled with well-known educators and traders.
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