If you want to invest in trading foreign currency exchange markets without any hussle, Forex PAMM accounts would be a good choice for you. It is the best method for individuals to pick and choose their money managers for forex trading without spending their precious hours.
What does a Pamm Account mean?
Pamm stands for Percentage allocation management module. It is also known as percentage allocation money Management; a form of pooled money forex trading. The individual who wants to invest in trading foreign currency exchange markets known as investor gets to allocate their money in the desired proportion to the qualified trader(s) or money manager(s) of their choice to manage multiple forex trading accounts using their own capital and such pooled moneys, to generate profits. The investors benefit from profits with minimal involvement by using these accounts.
Participants in the PAMM Account setup:
- Investor(s)
- Forex broker/ forex brokerage firm
- Trader(s)/ money manager(s)
How does Pamm Account work?
Investors are interested in earning profit from forex trading, but either they do not have time to devote to trading activities or they do not have sufficient knowledge of forex trading. Involve the professional money managers who have experience of trading and managing other people’s money (like a mutual money manager), as well as their own individual trading capital. Investors also register with a Limited Power of Attorney (LPOA). The essence of the signed agreement is that investors agree to risk their forex trades, giving their capital to the chosen money manager who will use the mutual funds for forex trading according to his style and strategy of trading. It also shows how much money (or percentage) the manager will charge for this service.
Role of forex broker:
Provide a safe and authentic platform that allows money managers and investors to interact. It Facilitate the trading activities of money managers within the realms of allowed regulations, account keeping, deposits, withdrawal, and related activities
Despite being a usual trading business platform, it allows transparent review, feedback, rating, and related mechanisms for investors and money managers to select and interact with each other. With the best brokers, you can choose the most profitable pamm account for forex trading.
How do investors choose money managers?
Investors can choose a money manager by researching detailed CVs, qualifications, past performance in terms of returns, amount of funds managed, number of associated investors, positive/negative reviews, etc. on traders/fund managers. Brokerage firms offer many ways for investors to make an informed decision. In addition, the firm set up external rating systems. Thus, you can get an idea of the skills of a money manager or trader.
The risks in PAMM Account:
Providing heaps of benefits, Pamm Account also carries some sorts of risk for both participants.
- Money Managers
The traders or money managers have access to the money only in their pool and cannot pull money from investor’s trading accounts. They are eligible to set a minimum and a maximum amount criteria for investors. They have the liberty of accepting or denying new investors as they wish
- Investors
Usually, investors cannot choose forex trading assets except those offered by the money manager. They bear the risk of losing their capital due to the trading activities of money managers, but they also have the potential for returns if the manager performs well.
The Bottom Line
PAMM accounts are the best method to pick and choose money managers for forex trading. It provides benefits to the investors with minimal involvement. However, there is a little risk of capital loss, based on a money manager’s performance. But this loss can turn into profit after understanding the desired profit potential and risk aversion. Individuals should select a PAMM account broker and money manager diligently.