We hope that this post will be interesting and useful to both beginners of the Forex market, who’d like to invest minimum money, and experienced managers, who invest large amounts of funds in diversified investment portfolios.
Everyone, who comes to financial markets, has several goals, but one of them is making money (not losing, right?). Everyone has their own possibilities and ambitions. Everyone has their own way to pursue goals, uses proven techniques, copies approaches of the others or creates new ones.
Investor for a trader
Ask traders if they really need investors and not all of them will say yes.
Why? Every answer differs from the other one, but most of them say that they don’t want to bear responsibility for other people’s money. You may call them investors, but only for themselves. Other part of traders believe that sooner or later they will find investors or investors will find them. This desire is quite natural and logical: to develop, evolve in financial terms, create an asset manager business model by attracting investments, and generate income for investors and themselves.
In most cases, the first stage for beginner managers is to look for money among relatives, friends, and acquaintances. It’s quite risky, because in case of failure their relations may be seriously damaged. It’s up to them to decide whether this battle is worth the blood. Many of them manage to raise their capital in such a way, but not big enough, that’s why eventually they switch to other methods of communicating and attracting new clients-investors.
If you decided to take the path of a professional asset manager, the first thing you should have is an effective trading strategy and along with the discipline in using it. Your trading skills and results are the best argument for attracting prospective investors. It’s important to understand who a Forex investor is, and what their nature and emotional drivers are.
Types of investors on Forex
If we try to describe an average Forex investor, we’ll get the following picture: as a rule, it’s an individual, who has savings and wants to raise their capital by investing money, because it may generate more profit than bank deposits. Usually, they don’t know how to trade on their own, but want to improve their finances. Trading on the Forex market is considered as one of the most attractive ways of making money if compared to other projects. Even with a rather conservative approach to trading (considering commissions paid to traders), investors can count on 60 pct. p.a. This may be one of the reasons why on the market there are more investors with free capital than successful traders.
Another interesting, but more professional, type of Forex investors consists of former traders, who, due to some personal reasons, decided to fundamentally change their role on the market. They can be called more reasonable market players, who have an eye for analysis, trading, and risks, hence professional relationship with them may be the most efficient of all, in case you also an expert in the field, of course.
The category of investors, who have never come across trading on financial markets, may be rather troublesome. Due to their inexperience, impatience, and excessive emotional responses to ongoing events, they will ask a lot of inconsequential questions and bother over a petty business. In other words, interfere with your work. This type of investors care for getting profits quickly more than for allowable risks and wise asset management.
There is no universal method for finding investors, but there are several approaches how to sell yourself as a professional trader and asset manager to prospective clients. For this purpose, every trader can choose one or several available methods of communication.
Some time ago, there was a very popular way to attract investors: traders published their business offers on dedicated online forums. However, there were too many of such messages and the got caught up with the others, simply turning into spam, that’s why the method outlived its usefulness. More talented and “advanced” traders create their own analytical websites, blogs, and YouTube channels, where they share their thoughts and ideas on the current market conditions.
Also, they can write analytical reviews with charts for popular online and offline resources. Quite often, you can see trading schools for beginners, where you can also find investors. All methods described above are communication ways for extending your social circle. It may help you show to the audience your knowledge, expertise in market trends, and a variety of trading skills. Most often, this is all beginner investors need, but really experienced ones will surely ask your for invest-access to your account and closely follow your trading activity for several months.
One of the most important milestones in development of trading and investing was expansion of social trading investment services, like CopyFX. Many people say that such services help traders attract investors by showing their skills openly, without wasting time on communicating in social networks, blogs, or public pages. At the same time, it may the most difficult way of attracting investors, because you will be surrounded by competitors and have to do your best to retain clients by constantly improving your account balance and minimizing risks.
As for advice, the most useful one for supporting your image of a professional trader is to predict the amount of profit and try to make it stable. Don’t rush to become a hot shot with the monthly profit of 100500% and “drawdown” more than 80%. The most attractive outcome for wise and wealthy investors will be the profit of 25-30% a month, but you have to keep it steadily in this range for six months at least, without “drawdowns”. When asking for a commission, remember that it shouldn’t be too big – the best option is 25-35% of the profit. If you manage 300,000 USD and at the end of the month earn 90,000 USD, with your 30% commission you can count on 27,000 USD.
Another thing worth mentioning is that you shouldn’t withdraw all profit, but capitalize it. The more the trader’s own equity is, the more chances they have to be trusted and attract new investors.
Don’t be afraid of trading in public or avoid talking to your colleagues – as a rule, people like self-confident and wise traders, but not twaddlers. When getting more active in your professional environment, you don’t have to share all your secrets or reveal any special aspects of your trading system. The more often you or your name is mentioned in traders’ and investors’ communities, the more competent your opinion is, hence more people that are interested in your services.