Setting up a Forex Hedge Fund

[fulcrum]

I have several friends who have pestered me for several years to start a small hedge fund so they can participate in Forex with me doing the trades. Any ideas on how to go about this would be appreciated.

[jotace]

Small funds are to become big this could be a problem. First thing i think is to have a trade system; then a small group of people to enter only one of you should be the one to operate with the money.

Just ideas nothing more.

[Mburdge]

The best way to do it in a small way is to use a ''PAMM' account at someone like IFX (www.cbfx.com)
You can get your friends to open their own account deposit money.
They can then sign a power of attorney giving you permission to trade the account. (which are grouped together for trading purposes)
This way you are not hling client money which removes pretty much all regulation.
The platform works well for one click you can trade for as many people as you want.
the broker will also calculate deduct your agreed profit share.

Good luck

[fxtrader777]

OK here is my recomendations:
1. You should have your own system which had been back tested results is positive. BUT not only positive but diversified. This means that when system stops working you should underst that your system does not work any more. For example there are plenty of systems which shows results of 1500 pips a month but in sometimes loss reaches 800-1000 pips a months this systems are useless because drawdown is too much. The system should be design so that when you lose 10% of your account (following money management rules) you should underst that system stopped working out for you it is time to refresh system or develop new system. Briefly: The system should be diversified
2. The other concept of diversification is that system should work for two separeted currency ps For example on EURUSD AUDJPY or any other combination. If systems works only for EURUSD USDCHF this is not diversificatin.
3. Always follow money management rules (it is very very important). Never broke the law. Do you know what is worst in trading for trader? When trader breaks a rule it works trader gains this is worst thing in trading leads to total destruction of descipline.
4. I cannot give you recomendation in psychology because it should be acquired during trading experience. But note: 1) If you feel you are emotional do not trade 2) if you feel you are under pressure do not trade (this is most inportant in managing Hedge Fund because often there is pressure fund shareholders I was trading commercial bank's account I am familiar with this feeling). 3) If you are impulse trader stop trading. I have never seen impulse traders were successful traders.
4) Throw away the grid the money you see on your account consider them as just numbers do not look dream that you will buy house if you win. 5) Eiphoria is one of the worst enemies of the traders. If you are professional trader then I am sure you had this period in your life you know what it is.

Also before you start trading agree with shareholders on risks trading conditions. Tell them that your system can provide some specific amount of pips a month on an average (take very small pesimistic monthly result that your system provided). Always disscuss what you will do if system fails for example I have agreement that if I lose 10% of total account I stop trading.

The important is that your system should be forward tested which means when you have system back test it you get positive results then you should trade this system for duration of 3 months to find out how this system work. Desirable months are September January August because in this month market always makes changes.

thanks sorry if there are mistakes in my English

[fulcrum]

These ideas have been great! Thanks to all.

[fxtrader777]

you are welcome

take care