At A Glance: Forex Managed Account Track Records

Not too long ago, a trader asked me to review his track record, but I only had 5-minutes to do the review.  Is it possible to examine a track record in five minutes?   The answer is: yes. It should just take a few minutes to analyze a well-documented Forex track record*.

Unfortunately, most track records are poorly organized and difficult to glean any information from regardless of how long the reviewer has to peruse the trade statistics.  Well-organized track records will tell the reviewer the following (not listed in the order of importance):

  1. The Forex trader’s name,  location and the name of the program.
  2. Regulatory jurisdiction.
  3. Brokers name and location.
  4. Amount of assets that are under management.
  5. Peak to trough draw-down.
  6. Length of the trading program
  7. Month by month returns and  AUM

Forex Volatility

Forex and volatility go hand-in-hand.  Forex volatility is determined by the movement of a Forex rate over a period. Forex volatility, or real volatility,  is often measured as a normal or normalized standard deviation, and the term historical volatility refers to the price variations observed in the past, while implied volatility refers to the volatility that the Forex market expects in the future as indicated by the price of the Forex options.   Implied Forex volatility is an actively traded options market determine by the expectations of Forex traders as to what real Forex volatility will be in the future.  Market volatility is a critical component of a Forex traders evaluation of a potential trade.  If the market to too volatile, the trader might determine that the risk is too high to enter the market.  If market volatility is too low, the trader might conclude that there is not enough opportunity to make money so he would choose not to deploy his capital.  Volatility is one of the most critical factors that a trader considers when he is deciding on when, and how, to use his capital.  If a market his highly volatile, a trader might choose to deploy less money then if the market was less volatile.  On the other hand, if volatility is low, a trader might decide to use more capital because lower volatility markets might offer less risk.