Managed Account Scams: How to Detect and Avoid Them

Although trading in Forex can be fun, it can also be stressing. Let's face it, not everyone can sit in front of the computer for hours looking at charts and making quick decisions, or for that matter has the desire to do so. This is precisely the reason why “managed accounts” are so appealing, it really is pretty simple, let an expert trade for you - just sit back and watch the profits roll in.

Unfortunately, scammers recognize this too, which is why managed account scams are one of the most typical traps in Forex. They exploit things like trust, laziness, and the concept of “easy money.” To be sure you don't fall victim to the scam, it is important to understand how the scam works and what the key warning signs are.

What is a Managed Account?

Generally speaking, a managed account means you provide a trader or company access to your funds and that trader basically trades your account for you in exchange for a fee or that they receive a percentage of your profits - in theory it is just like hiring a professional to look after your investments.

The problem is that while there are a handful of legitimate managed accounts, the industry is filled with fake managed accounts. These scam artists will promise the world, take your funds and either disappear or manage to lose it all due to their trading incompetence.

Typical Warning Signs

Most managed account scams appear to have a common pattern. If you see any of these conditions, then you should run away:

Guaranteed returns - If an account manager says they can guarantee 20% profits each month with “no risk,” goodbye.

Lack of transparency - You will not see real records of trading, rather you will get only images of existing trades, or plain journal entries, or testimonials.A reliable manager recognizes that risk is a key part of trading and will be transparent about it, always.

How Scammers Earn Trust

Scammers seldom seem dubious up front. Many begin by being overly helpful, patient, and friendly. Often, they provide “proof” of previous success, presenting charts or real clients who allegedly doubled their money.

One relatable scam is providing a small “taste” of profit. Scammers will trade conservatively at first to show you a handful of profitable positions. Just when you believe everything is fine, the pressure is applied to deposit further (often a much larger deposit), this is when things take a turn, losses emerge, excuses materialize, and eventually you have lost everything.

A Story That Happens Too Often

To illustrate this point let's take a story like Sarah's who was a novice trader wanting to make a standard return to grow her savings but did not have time to learn Forex. Sarah found a manager on the internet who was promising steady monthly profits, her first month returned a positive 10%, so she was encouraged to add further funds.

By her third month things were beginning to unravel, when the account manager assured her that it was temporary drawdown. Weeks later her account was nearly wiped out, it took too long for Sarah to realize that she had trusted someone that was never going to be accountable.

The Role of Scam Brokers

Moreover, many scams involving managed accounts link directly back to dubious brokers.The “manager” will encourage you to open an account with a specific broker — one they have a hidden arrangement with. Why? Because scam brokers make money when you lose.  

Sometimes the broker and the manager are the same people. They get you to deposit your funds, trade badly, and then they profit from your losses while you are left with nothing.    

Legitimate vs. Scam Managed Accounts   

Here is a simple comparison for you:  

If your service matches that in the right column, that's your cue to exit.  

How to Protect Yourself 

There are a few easy habits that will help you avoid managed account scams:  

Keep control of your money – You should never given someone else unrestricted access to your funds. A good manager can trade for you but should not be able to withdraw your money.  

Confirm everything- Check licenses, read independent reviews, and check the broker with the governing authority for the forex broker to see if they are regulated.  

Start small – If you do decide to experiment with a managed account account, start small, an amount you can afford to loose and check to see that you can withdraw your funds before committing an actual amount.  

Don't Let Your Emotions Lead You  

Many scams work because they provide what appears to be an easy route from high levels of stress. The thought of "having somebody doing the hard work" can be soothing. But that soothing feeling can be dangerous. Remember, one thing is for sure when trading, there are no shortcuts. When you are not in control of your account, you are exposed to risk that you can't see or understand.  

Final Thoughts  

Managed account scams can be highly effective in trying to attract people who seek simplicity in a complicated market, and they promise safety, expertise, and ease and deliver disappointment and financial loss. By being on the lookout for red flags, and through not handing off control of your own funds, you now can protect yourself from being a victim as well.  

If you want to investigate safer ways of trading and learn how to instill your own confidence in your ability in the markets, please consider continuing in the Learn section on Wikilix. Knowledge will be your best form of protection against scams, and your best tool to real success in Forex.