Most traders who try to succeed in trading Forex face a question – „is it possible to be profitable in Forex at all?“. This is common because many beginners make similar mistakes – look for „Holy Grail“, use too many fancy indicators or think that complex systems are better than simple ones, etc. In Forex experience is the most important thing. So it is normal that after a strike of failures such questions arise. Some beginners lose faith and quit Forex. In this article I will try to give information about funds that trade Forex, how they perform and what methodologies they use. I hope that this will give faith at least to some. Some may dissapoint too. Most of the information I‘ve gathered from „BarclayHedge“ databases.

How did they perform

In a table below is a list of top 30 performers in Forex during 1 year (2011).

This table might give some wrong understanding, as we should also look at total return, drawdown and how much time it is „on market“. But as we can see such funds are profitable and some generate really solid returns. Keep in mind that most of these funds use good money management and they never use full leverage like 1:100. There are much more funds, some are losing ones. But average 1 year profit of all Forex funds is 4.28%. Average 1 year profit of profitable funds is 18.65%. In my opinion 18.65% is a good number and most entrepreneurs would agree that such returns are good for almost any business.

In a table below is a list of top 30 Forex Hedge funds in total returns.

Average total return is 320.88%. Worst performer lost 63.29% - that is a lot, but out of 153 funds only 27 were losers in total returns. In this table I also put maximal drawdown. And first position has a scary drawdown of 77.79%. Everyone has own “safe” drawdown in mind, but I would like no more than 20%. 10% would be great. In a table below are 30 worst performers in total returns.

I can tell that you are unlucky if you‘ve put all your money in Noblesse Oblige Capital for example. But we also should keep in mind that funds diversify their investments and Forex trading can be a very small portion of all money invested. Also they might be hedging currencies with commodities for example, so loss in Forex means profit in commodities. But I will not be going into this field this time.

Performance of funds tells us that it is possible to be profitable in Forex, not for all, but possible. Maybe returns might look too small for a trader with $5000 account, but these funds manage millions of dollars, so they use solid money management. Also it’s not always easy to fill large amounts of orders. So they face different problems than small traders. So small trader can increase risk and expect larger profits.

Let’s look a little bit inside

All funds have minimal amount of investment. It varies from $1000 to $25000000. It doesn’t mean that funds with large minimum accounts generate more profits. I would say other vise. Funds manage from tens of thousands to hundreds of millions USD. I’ve selected some interesting profitable funds and will describe all below.

  1. CenturionFx Hedge Fund. Uses two systematic trading strategies – swing trading and intraday trading. Swing strategy reward/risk ratio is at least 2 to 1 in each trading position, all positions are hold no more that for 1-2 trading days, uses reversal patterns, only the most liquid pairs are traded. Intraday strategy reward/risk ratio is also at least 2 to 1 in each trading position, all positions are closed in 1-5 hours.
    Fund started in Jan 2006. Minimum investment € 1000 K, management fee 1.00%, incentive fee 20.00%. Funds under management € 13.80 M. Total return 1491.6%. Compound annual return 58.6%. Average monthly return 4.19%. Worst drawdown -21.60 %. 2011 return 76.32%. Monthly standard deviation 7.39. Sharpe ratio 2.22.

  2. Exclusive Returns Ltd Exodus Program. Trades on intraday and inter day basis. Exclusive Returns Ltd believes that global economic growth rates, inflation trends, government policies, currency and interest rate changes, and demographic factors all interact to impact price trends. The process uses a systematic technical strategy incorporating a series of proprietary trading algorithms. The algorithms combine trend continuation and trend reversal signals.
    Fund started in Jan 2010. Minimum investment $ 10 K, management fee 0.00%, incentive fee 20.00%. Funds under management $ 0.83 M. Total return 700.23%. Compound annual return 182.88%. Average monthly return 9.28%. Worst drawdown -3.73 %. 2011 return 127.43%. Monthly standard deviation 7.11. Sharpe ratio 7.42.

  3. Artos Currency Fund L.P. Trading model based on fundamental macroeconomic research. Trades 15 main pairs. Funds is closed for the public due to its fund size.
    Fund started in Aug 2001. Minimum investment $ 15000 K. Funds under management $ 3.35 M. Total return 387.59%. Compound annual return 16.42%. Average monthly return 1.39%. Worst drawdown -14.81 %. 2011 return 77.91%. Monthly standard deviation 5.10. Sharpe ratio 0.83.

  4. MIGFX Retail Program. From their report – “trades with a short to ultra-short term outlook. Anything more than that we consider to be unreliable, and highly speculative. Our trading is based upon proprietary flow-based systems combined with discretionary inputs that have proven very successful over time. Through its use of leverage, the Retail (Growth) Program is specifically tailored to investors seeking above-market returns in exchange for a higher risk profile”.
    Fund started in Jan 1998. Minimum investment $ 100 K, management fee 0.00%, incentive fee 20.00%. Funds under management $ 45.00 M. Total return 8658.01%. Compound annual return 37.63%. Average monthly return 2.80%. Worst drawdown -14.04%. 2011 return 68.34%. Monthly standard deviation 4.51. Sharpe ratio 2.24.

  5. Forex Live Online (The "Fund"). Traded 100% in the spot currencies market on a short and long term basis. The Fund currently simultaneously trades 4 different systems. The Fund's trading systems are based purely on price action analysis and uses price action for exit strategies, take profit positions and trailing stop losses. The systems are weighted at 40% mechanical and 60% discretionary and trades on hourly, 4 hourly, daily and weekly charts. It is estimated in total, the fund's systems are 70% trend-following and 30% counter-trend. The Fund's systems do not use any artificial intelligence, genetic algorithms or neural net. The currency pairs that are traded are GBP/USD, EURUSD, USDCAD, AUDUSD, GBPJPY, USDJPY, EURGBP, and USDCHF. Maximum risk on each trade is between 2% and 4%. Real leverage is rarely above 10 times. 
    Fund started in Mar 2010. Minimum investment $ 20 K, management fee 0.00%, incentive fee N/A. Funds under management AUD 1.00 M. Total return 177.75%. Compound annual return 79.27%. Average monthly return 5.70%. Worst drawdown -26.12%. 2011 return 59.04%. Monthly standard deviation 12.38. Sharpe ratio 1.85.

  6. Metro Forex. It’s multi-disciplined approach involves a blend of fundamental and automated technical techniques. Asset allocations are usually determined by the trading committee according to planned risk parameters and reward expectations. The program seeks to profit from short term positions that may last for a few days or close intra-day. While the strategy is aware of long-term trends, there is a preference for many scaled-in positions rather than a large one-sided transaction. Typically the strategy uses only moderate trading leverage (usually between 1X and 10X) for most trades.
    Fund started in Jan 2005. Minimum investment $ 5000 K, management fee 2.00%, incentive fee 20.00%. Funds under management $ 145.69 M. Total return 305.61%. Compound annual return 22.14%. Average monthly return 1.71%. Worst drawdown -2.06%. 2011 return 18.48%. Monthly standard deviation 2.43. Sharpe ratio 2.39.

From all these Funds I liked the 4th fund, because it works since 1998, they manage a nice amount of money and their average monthly return is 2.80% - that is good. Just worst drawdown of 14% is not very nice. 6th fund looks very good from reports. It started in 2005, manages a lot of money, average monthly return of 1.71% is good and worst drawdown is just -2.06%.

Few conclusions

  • Forex funds can be and are profitable;

  • Monthly profits usually are 1-3%;

  • Funds use different techniques – fundamentals, technicals, mixed, swing, intraday, automated, manual, etc. So it means all of these work;

  • Funds have their strategies and trade stricly by it. It means, that a trader has to develop own strategy and trade based on it;

  • Fund I liked generates 1.71% monthly returns, while worst drawdown is -2.06%. It means, that by risk increase to 10%, we can expect ~8% monthly returns. If we trade like that fund of-course. 

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