Percentage allocation management module, also known as percentage allocation money management or PAMM, is a form of pooled money forex trading. An investor gets to allocate his or her money in desired proportion to the qualified trader(s)/money manager(s) of his or her choice. These traders/managers may manage multiple forex trading accounts using their own capital and such pooled moneys, with an aim to generate profits. blogs-image To understand PAMM accounts better, let us look at the players involved; The players in the PAMM Account setup:

  • ✔ forex broker/ forex brokerage firm
  • ✔ trader(s)/ money manager(s)
  • ✔ investor(s)
The PAMM Account manager; this is a trader who opens an account with a particular Forex broker offering the PAMM system. The account manager has to deposit a specified initial trading capital usually known as the manager’s capital. If the PAMM account manager can trade profitably; interested investors can allocate more funds to his/her PAMM account allowing him/her to trade a larger pool of funds. The PAMM Investor is more interested in earning passive income by allocating their funds to a profitable PAMM account manager hence replicating the trading performance of that particular account manager. The PAMM account manager manages investors’ accounts by limited power of attorney, meaning only their orders and positions can be copied to the investors’ accounts i.e. they cannot make any withdrawals or deposits on behalf of the investors. The PAMM account manager also chooses a percentage of performance fees on profits to charge for making trading decisions on behalf of the PAMM investors.

Advantages of the PAMM software;
  • ✔ Experienced Traders can maximise their profits and build a certified track record that could be the first step on their career path as Professional Fund Manager.
  • ✔ Investors with little spare time can take advantage of the best strategies shared by Traders on our Social PAMM page, while keeping full control of their own accounts
  • ✔ Investors can quickly join or quit a PAMM through a quick and easy process, which is usually completed within a few business hours.
  • ✔ Profit/Loss allocation of all trades through hourly NAV calculation.
  • ✔ It is based on an online platform, no software needs to be installed.
  • ✔ The service is highly customizable: Investors can autonomously choose which PAMM to join, Managers can set flexible fees structures (“offers”).
  • ✔ The system is safe for Managers as the strategy intellectual property is protected (Investors cannot reverse engineering).

Advantages of the PAMM account system to managers;
  • ✔ Profitable Forex traders are able to earn extra income apart from their own capital trading profit by getting access to a larger pool of capital from investors.
  • ✔ The PAMM account manager’s trading strategy is protected since it is not shared directly with the investors; only the orders and positions are replicated in the investors’ accounts.
  • ✔ The manager does not have to do tedious tasks like reconciliation or calculating individual lot sizes to be placed in the investors’ accounts. The PAMM account system automates all these processes and leaves the manager with only the task of executing their trading strategy.
  • ✔ The PAMM account manager is able to select the percentage of performance fees to charge for their trading services depending on the investors’ deposit amounts.
  • ✔ The PAMM account system deducts the manager’s performance fee automatically from the investors’ profits hence the PAMM manager is assured of getting paid.

Advantages of the PAMM account system to investors;
  • ✔ Investors who have no time or willingness to learn to trade in the Forex market on their own are able to make online passive income by investing with profitable PAMM account managers.
  • ✔ PAMM account systems have managers’ performance analytics enabling the investors to wisely choose PAMM managers suitable for their investments.
  • ✔ PAMM accounts are safe as the managers only have LPOA (Limited Power of Attorney) over the investors’ accounts and hence cannot withdraw from the investors’ accounts.
  • ✔ PAMM investors can invest their funds with a portfolio of profitable PAMM managers as the PAMM systems allows them to allocate their funds to more than one PAMM manager.
  • ✔ No downloads are necessary for the PAMM investor as investing can be done directly from the brokers online PAMM portals. Download of trading platforms such as MT4 or other trading copiers is not necessary.

Cons of the PAMM system;
  • ✔ Investor funds have to be held with the same broker as that of the selected PAMM account manager. An investor cannot have funds in one brokerage firm and invest with PAMM managers from different brokers.
  • ✔ Brokers without a maximum loss limit feature on their PAMM systems leave investors vulnerable to huge drawdowns or total account capital loss in case the PAMM manager has a poor trading period or makes mistakes.
  • ✔ The investor’s cannot learn the trading strategies used by their PAMM managers as this is not disclosed as only trades and orders are replicated in their accounts. How to determine if a PAMM Account is worth investing in
  • ✔ Interest in investing is growing and people are getting more and more knowledge about professional trading. However, their experience is not enough to conduct the investment themselves. Thus, PAMM Accounts are very popular. The choice of traders is the most significant point as the manager is the person whom you entrust to manage your capital.
  • ✔ There is some significant PAMM Account data that should be paid attention to when choosing the manager to manage your funds.
  • ✔ The first thing to analyse is the account opening date. From the graphs you can appreciate the length of the trader's work on the account, the account balance, the general growth, the consistency and their experience.
  • ✔ Operating income is the second significant thing for inexperienced investors. The success rate of traders is an extremely temporary attribute so if profits were 200% last month, they may just be 20% or less this month. Here you should appraise this steadiness over diverse intervals. Another factor you should bear in mind is the first value as it is easy thing to manipulate.
  • ✔ Another thing is manager remuneration. The most skilled traders can increase or multiply the minimal capital investment.
  • ✔ Pay attention to the aggressiveness trading which is the amount of risk managers take. Take a look at the number of deals and the amount of trading per day.
  • ✔ The deposit amount is the money amount under risk; it is the maximum trader deposit percentage used for trading. If trader's deposit is 50% or above, it generally means they are a high risk trader.
  • ✔ Recovery factor highlights a trader's ability to restore losses after fall and overcome the tension and potential fiasco. It is indicator of trader's success rate.
  • ✔ Manager's own capital. The trader with the big personal account is considered to be careful and responsible as he risks his own money as well.
  • ✔ The total equity of all accounts indicates the level of funds being managed and this gives reason to trust such trader.
  • ✔ The type of investment needs to be studied carefully. There can be two types: short-term and long-term investment. Long-term investment or scalping investment comes more recommended. It takes more time but can give a good potential profit.
  • ✔ Keep in mind all of these points when making your choice for an appropriate PAMM Account. Sometimes some websites show the lists of the best and selected PAMM traders. Don't rush when choosing PAMM Account; instead weigh up all the data. Choose the trader who works in a stable and profitable fashion.

  • Conclusion

    PAMM Accounts offer worthy opportunities for investment of funds. Choose an account manager and broker correctly after having analysed the potential risk and profit you can receive as an investor with minimal involvement.