1-You Control Your Money
There are few things that are more nerve-racking than letting a stranger be in direct contact with your money, and therefore control it. By depositing money into a managed fund, that is what you are doing. At some cases you even have to be authorized to withdraw any deposited capital.
Most managed funds have appropriate licenses to operate legally and have a lot of credibility. Even then, there have been cases of regulated funds taking off with their investor’s money never to be heard of again.
Since Forex trading is a developing market, new brokers and funds are being created almost every day. It can become complicated to decide which one can be trusted with your hard earned money, and which one cannot.
When you deal with signal providers, automated or not, any capital you decide to invest will remain in your control. Nobody but you will be able to move the funds (automated signals can technically fluctuate your capital by placing trades without your consent).
As far as investing money into Forex trading without actually trading yourself, signal providers offer the safest option currently available.
2-Automated with option to Intervene
One of the reasons why you may be hesitant towards investing in a signal provider might be because you do not want to sit in front of the computer, waiting for signals to copy on your account. A signal provider doesn’t necessarily have to be more work than a common fund.
In fact, you can easily find automated signal providers, which means that their trades are automatically copied to your account. Any entry they input will trigger trades on every account subscribed to their service. The main difference here is that despite being automatic you’re still able to intervene since you have total control of your own account.
Account size and position sizing will have to be verified with the service provider; riskier signal services may choose to enter bigger positions to increase their gains. Verifying the risk factor of the signals should be part of your due diligence.
It is much more difficult to be aware of everything going on behind the scenes when dealing with fund managers. Some have been known to boost the returns from their fund with their personal capital simply to bring in more investors.
Most of the time, you have no way of knowing how many transactions are being made by the manager, or what those transactions are, especially for funds composed of stocks that are held for longer periods of time. Obviously, if common funds made all of their transactions public, anyone would be able to imitate their earnings and avoid management fees.
When it comes to automated signals, you can see exactly what your open positions are, what the position size is, which trades ended up winning and which ones ended up losing.
Fund managers usually gets paid a percentage of the capital you invest in their fund every month or year. This can amount to a good deal of money, especially since funds that invest in stocks usually hold most of their shares over relatively long periods of time. This means that you are possibly paying management fees for little to no reason, as you could be holding those same stocks in your own account and make more money.
As for signal services, they are usually marketed under the form of subscriptions, meaning that you pay a flat fee for a certain period of time. This can be a decisive factor in your decision between a common fund and a signal provider.
If you are thinking of changing your signal provider, all you have to do is cancel your subscription, and you will be removed from their automated system when the period you paid for ends.