The PAMM account, or PAMM, stands for Percentage Allocation Management Module. An investment instrument is a percentage distribution management module. The account is managed by one person - a trader.
He trades on the international currency market with the funds that are available in the account. PAMM-account has a unique feature. All the profit that a trader could get is distributed among all investors in proportion to the size of their deposits. A similar rule applies to losses.
What is it?
A PAMM account is an account that is opened with one of the brokers for trading on the international currency market. It is formed from the funds of the manager account and funds of investors. Anyone can give their savings to the management of the trader.
In the process of trading on the Forex market, the manager increases his capital and the amount of investment of investors. An innovative investment tool is an improved version of trust management. Previously, investors independently searched for traders and gave them their money in person. The partnership did not imply any guarantees. Quite often, traders simply hid with the money of their investors.
PAMM-account completely excludes such a feature. The guarantor of fulfillment of the obligations of the trader is a third party - a broker. Money is transferred to the manager under strict control. The account manager can carry out trading operations with money, but he does not have the ability to withdraw funds invested in his account.
The trader is interested in increasing capital. The greater the profit on the PAMM account, the greater the fee for the trader. Manager fraud excluded. An unlimited number of people can invest in an account. The amount of investment can be any. The minimum deposit amount for some traders is $ 10.
The specifics of the PAMM account
A PAMM account is opened by a trader who has a sufficiently high qualification level for trading on the international Forex market. A trader invests personal funds in his account. In order to open a PAMM account, he must put his money in it. The minimum starting capital for most brokers is $ 500. We can say that the trader is the first investor in the account. Currency market participants who are serious are putting in their account an amount that is much higher than the established minimum.
When the account is opened, the manager creates an offer. This is a contract that an investor must accept on the eve of investing. An electronic document describes the terms of the partnership. It contains the following information:
- The minimum investment amount, which usually varies from $ 10 and above. There is no upper limit.
- The length of the trading period during which the investor cannot withdraw his funds from the account. Withdrawal is available only with a penalty. The trading period lasts from 1 to 4 weeks. After its completion, mutual settlements between the parties are carried out.
- Trader's reward or profit distribution. Most often, profit is divided in half, but there are times when traders withdraw 30 percent of the profit for their work to attract investors.
- Information for partners. Often, investors encourage people who have attracted investment in their account. It can be both one-time payments and a monthly percentage of the profit of the invested amount.
- Description of the strategy.It can be found not with all managers, however, the main tools used in trade are indicated.
- The specifics of communication. Managers often communicate with their investors. For this, an email address, a forum thread, and a phone number can be provided.
- The presence of penalties. If the investor decides to withdraw his capital before the end of the trading period, he will be forced to pay a fine. Its size can vary from 30 percent to 70 of the amount of investment.
Upgraded PAMM Accounts
Modern PAMM accounts are completely ruled out. However, investor capital may be exposed to certain risks. If the manager "merges" money in the market, the investor bears the loss. To reduce risks, a trading tool such as the PAMM Accounts Index was introduced.
It is a partnership between several good managers. The investor gives his money to manage not one person, but several at the same time. If one trader incurs a loss, he will be blocked by the profit received from others. The annual return on such financial instruments is much higher than standard. The profit and loss distribution scheme is the same as in the standard PAMM account.
The second modification of the PAMM account is its version 2.0. An investment tool is attractive because the trader is ready to cover a certain amount of losses of his investors. An additional clause is specified in the offer about the extent to which the manager is ready to compensate for the damage. This may be 10, 25, 50 or more percent. The risks of investor capital loss are minimal. The amount of investment in this type of account is limited by the size of the manager's capital. The money in the account should be sufficient to compensate the investor for losses in case of a descent of the deposit. For such accounts, a stop-out is set, the monetary limit of the account at which it is canceled.
What are the benefits of PAMM accounts?
A PAMM account as an investment tool has several advantages. If you compare it with bank deposits, it brings a much greater profit. The interest rate at the bank for a dollar deposit rarely exceeds 5-7 percent. Very interesting is the fact that throughout the year inflation eats up all the income. A good PAMM account can make a profit of 150 percent or more. But the investor not only does not make a profit, he can go into the red.
If you compare investing in PAMM accounts and HYIPs, there are also a number of differences. The latter, although they bring a high income, do not provide reports on completed operations. In other words, HYIPs do not advertise any data regarding their trading activities. An investor literally gives money to an unknown person and without any guarantees.
Trading on the selected PAMM-account (trading activity) is completely open. The investor has access to recent transactions. Thanks to statistics, it is possible to see how much a trader is trading, how much he closes deals in and in which direction. Open access to profit data for each completed transaction. This allows you to make sure that neither the broker nor the chosen PAMM are scammers and fully fulfill their obligations.
Should I focus on reviews when choosing a PAMM account?
PAMM-account will be profitable if it is chosen correctly. By entrusting money to the first manager to meet, you can completely lose capital. Before you give a large amount of funds to the management, you need to carefully study the statistics on existing accounts. All analytical and statistical data are provided by brokers and checked by them.
Many people mistakenly believe that they help to choose PAMM accounts reviews. They are undoubtedly useful, but they cannot become the dominant factor in making decisions. It’s worth focusing only on numbers, charts, and trading results.It is important to monitor trading accounts and study the ratings, but more on that below. It is worth paying attention to the fact that all statistics are only a report on the results of trade in the past. It is not a guarantee that in the future a trader will trade successfully. All responsibility for capital lies only with the investor. Neither the broker nor the trader undertakes such obligations.
Monitoring and rating accounts
Studying the question of how to invest in PAMM accounts, you need to start by studying the ratings of the latter. Each broker on the official website has statistics on the success of all PAMM accounts. The list includes all registered and active accounts. In order for investments in PAMM accounts to bring good dividends and not to drawdowns, you need to pay attention to a number of parameters indicated in the rating.
In the tables on the broker's websites you can find the following data:
- profitability, estimated annual profitability of the account;
- maximum drawdown;
- PAMM account age
- start-up capital of the manager;
- manager's real capital;
- amount of funds in management;
- percentage load of the deposit;
- profitability for the last month and some others.
This information is more than enough to, after monitoring PAMM accounts, make the right decision and invest profitably. Filters are built into the ratings that allow, by setting the input parameters of a suitable account, to discard all others. There is even a division into categories: aggressive accounts and conservative ones. The filter allows you to separate profitable PAMMs and unprofitable ones.
Criteria for choosing PAMM accounts
Considering the rating of PAMM accounts, you need to pay attention to those managers who have been on the market for at least 2 years. The more experience a trader has, the more reliable he is. Considering the rating of PAMM-accounts, pay attention to accounts with high profitability, which are only a few months old, is not worth it. They are unlikely to bring big profits. Traders are just starting their careers as managers. They try to disperse the deposit.
They violate all the rules of money management and receive high profits. Moreover, as practice has shown, such players do not stay in the market for a long time, and as soon as capital doubles or triples, it descends very quickly. The risk is not worth the cost. The greater the age of the bill, the better. In addition, there are no historical data on young accounts, and it is simply impossible to objectively evaluate the work of a trader. When considering such PAMM accounts, it’s not worth taking reviews into account.
Drawdown and loading of the deposit are no less important parameters. Experts recommend investing in PAMM accounts with a drawdown of no more than 30 percent. If this indicator is zero, it means the trader is outstripping losses or using a risky strategy. In this case, the chances of losing a deposit are greater than earning. Downloading a deposit also helps determine the tactics of the game trader. Using most of the capital in trading, the manager puts the trader’s investment at risk. According to the rules of money management, it is allowed to use no more than 20 percent of capital in trade. This allows in case of losses to restore the deposit.
A big plus could be the ability to connect to the trading terminal manager as an investor. In this case, a password must be provided. Such an opportunity is rare, because traders are in no hurry to disclose their trading strategies. If such a chance falls, you should not refuse it. A long-term PAMM account with an average percentage of profitability and access to the manager’s terminal can not only become a passive source of income, but also act as an excellent platform for training in trading on the market.
Little tricks
Considering the rating of PAMM accounts, with a detailed study of the information, you can see which trading tool a trader uses in his work.
The ideal option is one or two trading pairs.We can conclude that a person is well acquainted with the specifics of the movement of a certain currency and, thanks to experience, perfectly sees the situation on the market.
The fact of using a variety of instruments in trading, from 5 or more currency pairs, should alert. This already indicates the fragmentation of the knowledge of the trader and his orientation on a happy occasion. No, there are unique managers, but they are rare.
Consider every little thing when studying a PAMM account. How to choose a suitable manager, prompts information about how many investors trust the latter. These data are usually contained on the broker's website under the manager’s offer. If there is no such information, you should note for yourself the amount of capital in management. If it amounts to hundreds of thousands, then we can draw the appropriate conclusions. It is obvious that the manager is trusted.
Secrets of Successful Investing
To get a good income, you need to invest not in one tool, but in several at once, in the best PAMM accounts. It is recommended to diversify risks and form an investment portfolio of several components.
It is necessary to choose not only different managers, but also different brokers. This is due to the presence of not only trade, but not trade risks. It often happens that companies are declared bankrupt or are included in the ranks of scammers. It is necessary to divide the capital between managers and brokers in such a way that the loss of part of the portfolio does not affect the general financial condition. Choosing a broker company is just as important as PAMM accounts.
Having put money into the account, it is not recommended to relax. It is necessary to systematically analyze the activity of the selected account and consider the broker's business policy. This is where a lot of feedback about brokers and PAMM accounts will tell. If information appears that your broker has suspended payments or is radically changing its policy, you need to immediately withdraw money. These are the first signs that the company is experiencing difficulties, and the risk in this situation is not justified.
How to open a PAMM account and is it worth it?
The answer to the question is simple. Of course it's worth it! Let’s figure out why. Investing in PAMM accounts is a great opportunity to increase your capital. As mentioned earlier, the yield will be from 150 percent per year, and sometimes more.
Professional investors who want to go further in their education are thinking about opening their own PAMM accounts, which is quite reasonable. Profitability doubles in this situation. Similar thoughts are visited by those who had to meet a fraud in search of a PAMM account. Opening your own PAMM account presents good prospects, but you should not expect everything to be like in a fairy tale.
To open your own PAMM account, it is enough to have a minimum capital. Next, it is worth registering on the site of one of the brokers and installing the terminal on the computer. You can start trading immediately, but whether it will be profitable is a completely different matter.
As practice shows, about 95 percent of traders lose their capital. Only 5 percent of those who decided to conquer the foreign exchange market learned to profit from it. The learning process is not as simple as many advertisements say. Sometimes it takes years to acquire minimal trading skills, not to mention developing your own strategy.
An alternative solution to the problem could be continued investment in PAMM and parallel training in Forex trading. Only after spending a certain amount of time and solid capital on training, you can count on successful trading and good earnings. Freebies, which many rely on, are not here. In the end, those who manage to understand the foreign exchange market will be able to become successful managers and radically change their financial situation.
