Forex money manager: A money manager is responsible for managing the investments of an individual or a company. Normally, a money manager is an expert in research and selecting investments.
In the Forex market however, they will perform the trades for their clients and they will receive a fee for each transaction.
Money management phases:
-Sowing: In this phase, the Forex money manager starts to set up the trading account with the money of the investors and sometimes his/her own money.
-Growing: During this phase, transactions are done by the manager and it is possible to see the benefit.
-Harvest: In this phase, the first investment is recovered and it is possible to make a profit with more transactions.
There are different techniques performed by Forex money managers including:
-Core equity model: The core equity is the margin that can be used to trade.
Formula: Core Equity = Account Balance – Amount used in Open Positions
As the core equity rises or falls it is possible to adjust the amount of the risk.
After the core rises, it is possible to take money from the profits to trade and in that way protect the initial capital
-Total equity model: The equity is determined by the total amount available in the account balance plus the value of all open positions.
Formula: Total Equity = Account Balance +/- Value of Open Positions
This means that if there are open positions in the positive, the new position risk will be calculated in relation to the balance and the possible profits or losses.
-Reduced total equity model: The equity is the result of the capital used in open positions subtracted from the starting balance and any benefit from a stop loss (protected profits) order should also be counted.
Reduced Total Equity = Core Equity +/- Protected Profits
A Forex money manager will manage many accounts helping their clients to make profit from trading.