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PAMM Accounts Explained
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Definition: PAMM Technology
What is PAMM in forex?
The PAMM or Percentage Allocation Management Module is a trading platform that simultaneously administrates an unlimited quantity of managed accounts. At the same time, traders create trading positions, PAMM copy trades, and distribute the sizes of trades according to an allocation percentage to the investor’s account.
Investing clients could be in their numbers but making use of a single trader. All this dealing is done using PAMM technology. Funds allocated to a PAMM account are allocated a percentage share, the size of funds from each investor within a single account. This is such that investors could own 25%, 35%, 20% of the total fund, with the owner (trader) owning the remaining 20%.
How does the PAMM account work?
Therefore, 3 parts are involved here: A broker firm that owns the trading platform; The trader or account manager responsible for allocating funds to trading products, which are the foreign exchange or forex in the case of PAMM; The investor who allocates their money to a trader with the hope of making profits from the activities of the trader.
Traders in a PAMM account are called fund managers or masters, and investors are called followers because they follow their master’s trading strategy or portfolio allocation. The master has limited power of attorney and can act, to a certain degree, on behalf of their followers. A trader or master can simultaneously manage an unlimited number of followers’ accounts.
Worth noting is that the trader, in this case, also has their own money in the instrument being traded and remains a client to the broker firm.
Here we can see another example with one fund manager and 2 investors :
PAMM MAM Review – The difference between MAM and PAMM managed accounts
MAM system forex
MAM account (Multi-Account Manager), as PAMM account, allows traders to use the percentage allocation method but provides greater flexibility to allocate the trades and adjust the risk of each sub-account based on the clients’ risk profiles. MAM accounts combine individual trader accounts into a large pool of managed funds. A lot of brokers offer and PAMM and MAM accounts.
MAM fx or Multi-Account Manager forex accounts can do as same as PAMM accounts. They will still give you much greater flexibility to allocate the trader trades and adjust each sub-account position’s risk based on the client’s trading risk profiles.
So we can talk about PAMM and MAM technology as one technology.
How to choose a PAMM fund manager?
The forex market attracts its clients because it seems easy to get a portion of $5.3 trillion daily deals with high returns and big volume and volatility. But, as you guess from the “it seems” part, getting money in this market is not the safest bet for many traders. If it were just a place to collect your invested returns, it probably would be there. A large portion of that money comes from quick thinkers, and it goes to smart thinkers. To get the Forex market’s best, you will need to learn as much as possible about the market, its basics, and its technical aspect. However, to get a grip over it, you’ll need to have good fundamentals in financials. If you don’t, then find somebody who does. If you don’t have a financial background, you might want to think about PAMM investing.
Hotforex PAMM account review
Hotforex PAMM platform is well designed and can be used by all HF clients. Traders can earn money sharing their trades, and investors can easily pick several providers (PAMM systems). However, PAMM traders risk too much money (large max drawdown), so investors must be careful when picking PAMM strategies.
Below is presented Hotofrex PAMM table:
Are PAMM accounts safe?
PAMM accounts are safe in technology matters if they are created at regulated brokers. However, PAMM accounts are not always profitable if fund managers do not pay attention to risk, huge drawdown, or bad trading decisions.
PAMM investing is having your money entrusted to a manager who can safely deal with it as if it’s their own. And in a way, it is theirs to operate based on profit/loss. With PAMM investing, there is software that distributes the profits and losses automatically.
Here are some tips on how to wisely choose your PAMM manager.
One of the first things to consider is the manager’s experience. It’s the same thing with hiring any help. You want to get somebody who has experience. For this sort of help, you want to check the period an account managed by that certain fund manager. You want to see an account that has been around for at least three or four years. Only then should you check out the rest of the results of the account. The consistency in performance is what gives away a trader with experience.
After the experience is checked and passed, you want to see how it went with live trades. If you see that your broker isn’t offering valuable information, you can ask your fund manager to show those results, for example, in my myfxbook. You will see what’s the drawdown like, as it gives you a hint about the risk’s size. If you see a high risk in drawdown, we suggest you avoid those. When that’s passed, you can check how consistent your fund manager is with a certain result. Consistency is better than having big profits with the lack of consistency, which shows more luck and less strategy.
The next thing to check is the capability of the fund manager to recover. The recovery factor represents the quickness the trader can recover from suffering drawdown. Obviously, what you want from your manager is to have a great recovery factor, representing their reliability.
The recovery passed; check how much investors have their accounts managed by your fund manager. That’s another safe thing upon which you can know if your fund manager is reliable. If several investors trust that particular fund manager, that’s a good reference. If there is a chance, you’ll want to see how good your fund manager is with all those clients.
Total equity is something to check out also for choosing your fund manager. The safest bet is to find somebody who trades at accounts of medium sizes. The reason for that is when a fund manager has a lot of capital to operate with; they might deal with risky trades. You never know what they would do with the number of funds you have. Therefore, try to find somebody who deals with a similar account you have.
How you pay your fund manager?
Since a fund manager is basically a trader but trades with your money, he can only get a portion of your two returns. Fund managers who are successful traders, you can expect that they would ask for larger remuneration. However, if your fund manager does have a proven track, don’t bother to negotiate too much about their commission.
You can always make sure to make a good deal and discuss all the terms with the broker before investing your capital.
PAMM Advantages
The first advantage that PAMM technology brings to the table is that bigger pooled funds make more profits than smaller invested portions. This is so, especially in forex trading, because trading in foreign exchange has tiny profit margins, making sense when the amount of invested money is higher. Individuals might find it difficult to raise money, hence the need to pool funds together.
The other advantage is that of taking advantage of an expert trader’s skills to make profits. Investing, especially in forex, is not a piece of cake, and many investors lose out on all their money on their first try. Therefore, PAMM technology enables amateur traders the opportunity to piggyback an expert trader’s experience and make money whilst sleeping.
More so, using this technology allows investors to make money on the back of almost zero administrative hassles. This is so because all the investor has to allocate funds to the trader’s account and wait for the trader’s reporting. The trader is the one who does all the work and will make sure that everything ticks the boxes regarding the fund.
Another advantage of using a PAMM account is that it is extremely safe to follow since the involved trader will also have their own funds in the account. This allows the same trader to exercise caution with investors’ money since any losses will hit their money hard.
Lastly, in a PAMM account, you get profits equivalent to your percentage ownership of the fund. This means that you can control how much you make by investing a little more than the rest. For example, when the fund makes $100 000 in profits, the investor who owns 70% of the fund will be guaranteed $70 000 in earnings.
Are there any disadvantages to using a PAMM account?
Just like any other thing about life, a PAMM account has got to have its own weaknesses. But hold on; don’t start panicking because it can’t be that serious.
Using a PAMM account could only hurt an investor if the same investor owns the biggest portion of the fund, say 55%, and the fund goes on and makes a huge loss. Remember that you get or lose what is equivalent to your percentage ownership of the fund. But you cannot be worrying too much about this since the masters in a PAMM account are largely experienced traders with a proven record.
PAMM account brokers list is:
| Best PAMM account forex broker | Founded Year |
|---|---|
| HotForex | 2010 |
| AvaTrade | 2006 |
| Alpari | 1998 |
| InstaForex | 2007 |
| FIBO Group | 1998 |
| Grand Capital | 2006 |
| Forex4you | 2007 |
| FreshForex | 2004 |
| IronFX | 2010 |
| LiteForex | 2005 |
| Oanda | 1996 |
The best PAMM account forex brokers are:
1) Alpari PAMM Account Service
2) Instaforex PAMM Account service
3) Dukascopy PAMM Account Service
4) Hotforex PAMM account
Conclusion
PAMM accounts for technology as a welcome invention in the world of forex trading. From what we have learned so far, we realize that traders understand trends better than others in trading. These have a higher probability of getting it right with their portfolio allocation or taking positions (Buy or Sell). Therefore, PAMM technology allows less understanding of the trends to profit using the experts’ knowledge.
Using this technology is done through a regulated Broker Firm; hence it is safe and can be trusted, as proved. There is no other safest way to make profits by bringing together an experienced trader and other investors through a central brokerage system.
So, how to open a PAMM account?
