A PAMM (Percent Allocation Management Module) account is a forex account managed by a professional trader – managed and invested in by multiple investors. It is a type of trust management that provides profit for all the participants: investors as well manager and partners.
Advantages of PAMM account
An investor earns money without even wasting time and effort on forex trading, entrusting his money to a professional trader. The investor does not have to worry about how to respond to currency volatility or how a Tokyo earthquake affects the Yen.
A manager selects an existing or creates a new trading strategy and gets additional profit for managing invested funds in addition to the ordinary trading profit. All the invested funds belong to investors.
Partners earn money just for attracting investors to PAMM accounts managed by trusted professional traders.
How do PAMM accounts work?
A trader selects the best forex manager he can find, and the most appropriate managed account among those displayed in PAMM rating. That’s it on the technical part of the process. But the most important and significant point here is to select the right professional for managing your money. Each trader tends to invest money with a view to maximising potential profit while minimising risks. So, how does one go about selecting a profitable PAMM account?
How to choose a PAMM account
The following advice is designed to help you choose the best PAMM account, which should help you to identify safe and reliable managed accounts and maximise profit from Forex investments.
1. Operating period of PAMM account
You have to pay attention to the experience of the PAMM manager, i.e. the operating period of a certain account. Time is definitely needed to adapt the manager’s selected strategy to current trading conditions. Having a number of investors allows a forex managers to trade larger volumes than if he was just using his own funds. Therefore, any trader, even the most successful one, needs some time to adjust to Forex trading changes.
2. Number of investors
Pay attention to the number of traders who have entrusted their money to the managed account you are going to select. A reliable PAMM account is one trusted by many investors. Some traders manage huge amounts that indicates a high level of professionalism.
3. Amount of invested funds
If the total investment amount of a certain managed account you are going to invest in, is less than $5,000, I would not even consider it. Other investors have already carried out the whole process of selection of successful managed account, thus it is possible to choose the most successful PAMM account just by the number of traders who have already invested in it.
4. Manager’s share
The larger the amount of his own funds the manager risks trading, the more attentively and seriously he will treat your invested money. I would not advise you to choose an account where the manager’s deposited funds are less than $10,000. No one wants to loose money, so such an amount should give you more confidence. It is not worth bothering if the total managed amount is considerable but the manager’s share in it is less than 10%. It shows that such forex manager is trying not to put his own money at risk.
5. Percentage of remuneration
Remuneration for money management, set at a level of 50% is excessive. Actually, for me, it is not critical, but sometimes I do pay attention to this, especially when I have doubts about the efficiency of such a manager. In my opinion, a reasonable rate of remuneration starts from 20% and up to 40%.
6. Trading strategy
Without understanding the options of a manager’s trading strategy, you are not able to estimate all the risks to the fullest extent and choose a reliable PAMM account. If the selected forex manager is trading under a martingale system, be ready to prepare yourself to high risk level.
However, an investor can personally ask the manager about the trading strategy they use.