What Is A Forex Trading Advisor / Manager?

A Forex trading adviser, or trading manager, is an individual or entity that, for compensation or profit, advises others on the value of or the advisability of buying or selling currencies for accounts explicitly for profit. Providing advice can include exercising trading authority over a customer’s account via a limited, revocable power of attorney. A Forex trading advisor can be an individual or a corporate entity. Forex managed account programs can be run by internal trading advisors, i.e., traders who work directly for the Forex managed account program or advised by outside managers. The terms “manager,” “trader,” “advisor,” or “trading advisor” are interchangeable.

The following is a fictional example of how a hedge fund would work with a trading advisor. A hedge fund called ACME Fund, Inc. has raised $50-million to be traded in the Forex markets. ACME charges their clients a 2% management fees and 20% of new equity highs as an incentive fee. In the professional trading community, this is called charging “2-and-20”. ACME needs to hire a Forex trader to start trading the raised capital, so ACME reviews a 10-different currency trading advisor’s track record. After doing their due diligence and reviewing the trading advisors’ key metrics, such as peak-to-trough drawdowns and sharp ratios, ACME analysts think the fictional firm AAA Trading Advisors, Inc. is the best fit for the fund’s risk profile. ACME offers AAA a percentage of the 2% management fee and the 20% incentive fee. The percentage that the hedge fund will pay an outside trading advisor is always negotiated. Depending on the trading manager’s track record and capacity to manage new capital, a trading advisor could earn over 50% of what the hedge fund is charging the clients to manage their funds.