What are pamm accounts and how to choose the right pamm account for investment? What are pamm accounts: who created them and how to make money How to choose the right pamm account
Investing in PAMM accounts is one of the best passive income opportunities for those who do not want to spend their own time studying strategies and tracking events that can affect the profitability of investments. This method is also convenient for novice investors, as it does not require prior knowledge and significant experience in participation in foreign exchange trading.
What is a PAMM account
PAMM accounts got their name from the English "PAMM", an abbreviation that means a percentage distribution management module. In the most general terms, the system can be described as the transfer of funds to a trader for trading on the international Forex currency exchange.
The manager, who has some experience in the foreign exchange market, opens an account on the Forex exchange with the help of a broker (dealing center), after which he attracts investors who will transfer their finances to him for trust management.
As a result, money from many investors is collected on a single balance sheet, which the trader then uses to buy and sell currencies. The difference from other methods of investing on the Internet is that any trading means are available to the manager, he does not report to investors about upcoming operations and does not have to obtain permission for them - this greatly simplifies the work and contributes to greater profits.
At the same time, investments in PAMM are protected from theft, because the trader cannot use them otherwise than in trading operations. Thus, the investor is protected from the possibility of withdrawal and theft of money by the trader. The terms of investments, the percentage of profit received by the trader, the rules for withdrawing funds, and other details are negotiated by an offer - an agreement concluded between the investor and the manager.
After receiving the profit and deducting the interest paid to the manager in accordance with the agreement, the funds are distributed among all investors according to their share in the total capital.
We have invested part of the capital in these projects:
Investment Example
A trader working on Forex independently receives a monthly average profit of 5%. In this case, when investing personal $ 1000, the yield will be $ 50. The same strategy does not limit the volume of transactions, but the increase in capital increases profits accordingly. Therefore, opening a PAMM account allows you to attract money from third parties and use it in trading operations.
It turns out that if two investors decide to invest in PAMM accounts, the total amount of funds increases. $1,000 came from the first, $3,000 from the second. Given the investment of $1,000 of the trader's own money, the total amount of money will be $5,000.
If the average yield remains the same at 5%, the profit per month will already be $250. The average percentage of the manager's remuneration prescribed in the offer is about 40%, which are deducted from the total earned amount, and the remaining money is distributed between the two investors in accordance with the amount invested in the turnover. The distribution result can be viewed in the table below:
If the results of trading do not bring profit, losses are distributed between investors and the trader in the same way - in accordance with the percentages that form part of the total account. This leads to a greater interest of the manager of the success of the trade.
Benefits of investing in PAMM accounts
Before the advent of such a scheme, the depositor and the trader worked directly, the first was forced to provide the second with access directly to his trading account. In this case, the trader could only be interested in an account with significant investments - managing small amounts took a lot of time compared to the possible profit, so the entry threshold was too high.
The second option for cooperation is the transfer of money directly to trust management. Trading with this approach could not be checked by the investor in any way, and the manager had the opportunity to use other people's money, which led to facts of fraudulent actions.
Investments in PAMM accounts are free from the disadvantages of the described methods and have the following advantages over them:
- The account is opened on the site of a broker, who acts as a guarantor, both to the trader and to the investor, in compliance with both of their obligations.
- It is possible to access the history of the movement of finances on the account, access to the statistics of each of the managers is also provided by the brokerage company.
- The funds received from investors can only be used in the process of trading; the manager is not able to withdraw them on his own.
- Convenience in terms of diversification - the final balance can be replenished once, and then the entered finances are distributed among different managers, provided that they work on a single platform.
- The risk of losing investments is not only for investors, but also directly for the traders themselves - they must invest their own money in PAMM accounts, a small percentage of the manager's funds becomes a negative factor for an experienced person, in which case it is extremely difficult to attract money.
- PAMM brokers strive for convenience, so ratings are compiled based on a quick search for a trader.
- The process of entering the trade does not require coordination and lengthy negotiation of conditions - it is enough for a potential investor to familiarize himself with the terms of the offer and confirm agreement with them by pressing one button.
The general advantages that investments have include the following factors:
- Low entry threshold - you can start investing as little as $10.
- Any possibility of fraud is excluded - the manager has no other way than in the process of trading, access to the money lying on the balance sheet, both to initial investments and to profit.
- Investing in a PAMM account, unlike most other methods, does not require specialized experience and special knowledge - to make a profit, it is enough to choose the right manager and correctly distribute investments.
- Money can be withdrawn at the request of their owner at any time convenient for him, the operation does not require waiting or ordering in advance.
- Trader's actions can be tracked from the personal account and analyzed.
- The manager faces risks not only of losing his own funds, but also of his reputation - poor performance will alienate other possible co-investors from him.
- The choice is facilitated by the simplicity and accessibility of settings - a person can select PAMMs, the managers of which use different strategies, receive different incomes and play with different degrees of risk.
The only negative is the risk of losing money, but this is a property of almost any investment, especially those based on the human factor. The danger can be minimized by a serious attitude to the choice of a manager, an analysis of the strategies used by him and other indicators.
Diversification is the main principle of professional investments
The basic rule that is mandatory for investment is risk diversification. It must be applied at the stage of preparing investments. This concept includes both the investment of money in PAMM and their distribution among various managers.
You should not invest all the money intended for investment only in PAMMs, they should account for no more than 40% of your investment portfolio.
You can avoid losses from potential risks as much as possible and get the greatest profit when money is transferred not to one, but to several managers. At the same time, it is worth analyzing the strategies that they use in trading and choosing players who use different methods.
Some brokerage sites offer effective assistance in compiling a PAMM portfolio that can increase overall profitability and reduce the risk of losses. Another type of diversification is the division of money by sites and currencies traded.
Types of PAMM investment strategies
All existing strategies are divided into three types and can be conservative, moderate and aggressive. To find out the strategy used by a particular manager, you can view the following indicators:
- Deposit load - determines the percentage of money at risk in relation to the total invested amount of the account.
- Drawdown - losses measured as a percentage of the total amount collected in the account.
An aggressive strategy brings the highest returns, but also carries the greatest share of risk. Shows the following indicators:
- Profitability - not less than 10% per month and more than 120% per year.
- Drawdown - from 50%.
Moderate accounts with medium returns and risks:
- Profitability - 5-10% per month, 60-120% per year.
- Drawdown - 30-50%.
A conservative strategy with low risks and returns:
- Profitability - about 5% per month, for the year - 60%.
- Drawdown - no more than 30%.
These parameters and characteristics can be seen in the indicators of the PAMM account in which it is planned to invest.
Selection rules
In addition to choosing a strategy, you will need to study a number of specific factors:
Trader experience
The lifetime of the investee makes it possible to better analyze the information. It is advisable to invest in PAMM, which is at least 12 months old. During this time, the manager should have at least one drawdown - his reaction to losses will show the ability to cope with the difficulties that have arisen. Otherwise, you may encounter a situation where, during the first drawdown, a person drains all available funds.
You can find another PAMM operated by the same trader - it will demonstrate the profitability and style of work, and if the money was drained, it will provide an opportunity to see the reason for the failure.
Drawdowns
Inevitable drawdowns in work allow you to decide what level of risk an investor can expect. You can choose the offer, the level of drawdowns of which you can afford: someone decides to take money with a drawdown of 20%, for another, even 50% does not become a reason for withdrawing funds. The best option: a maximum drawdown of 30%, the exit from which lasts no longer than 2 weeks.
Yield
It is worth paying attention not so much to the monthly profitability, but to the indicator for the entire time of work. Another characteristic is the change in returns throughout the trade.
Equity capital
It is better to invest in a PAMM account, the manager of which attracts large own funds - the higher his own risk, the greater the interest in increasing profitability. The trader's capital should not be less than $1,000.
Total amount under management
The more money is given to the "disposal" of the trader, the higher the confidence in him. Other investors also analyze the strategy and ways of managing money, and if they decide to invest, then such a check has justified itself. Conclusion - the larger the total amount, the more reliable the investment.
Rating
Brokerage companies provide an opportunity to use such a tool as the rating of managers, in which they are ranked from best to worst. It is advisable to look for data for a contribution in the top twenty.
Creation of a PAMM portfolio
Based on the foregoing, a PAMM portfolio is a set of different accounts in which money is simultaneously invested. This is one of the principles of diversification that allows you to increase profitability and reduce the risk of losses. You can make a portfolio yourself or invest in one that was prepared in advance by the manager.
Self-selection of a portfolio
Most dealing centers provide an opportunity to use a financial instrument called a PAMM account constructor. Thanks to him, you can choose the accounts that are added to the portfolio. Funds are distributed after it is drawn up, and the principle of investment depends on the degree of risk tolerance and the desired return. For example, a lot of money goes to managers with a moderate strategy, and the remaining money goes into management in aggressive accounts.
Ready portfolios
Such portfolios are compiled by the managers themselves and include the most reliable, in their opinion, options. A trader can invest himself in portfolios created for investors - this demonstrates a serious approach to choice. After new investments are made in the accounts included in the portfolio compiled by the manager, he receives remuneration from their owners.
Investment Tactics
In addition to choosing PAMM accounts, you should adhere to certain tactics for working with them. The following tools are used for this:
Loss limit
Most brokerage platforms provide the ability to automatically withdraw funds in case of losses that the investor begins to bear. Such a tool allows you not to track events, but to set an acceptable risk limit, the excess of which automatically withdraws money from the account.
Reallocation of funds
After the end of a certain period, funds are redistributed between accounts in accordance with the previously selected scheme. An aggressive strategy allows you to achieve a larger amount of funds in the account, but can lead to a drawdown, as a result of which most of them will be lost. Transferring money to a moderate account will avoid the risk of losing your investment.
Investment horizon
Differs from redistribution in that funds are transferred from aggressive measures to moderate strategic actions or conservative PAMMs not partially, but completely. The more aggressive the strategy, the less time should be kept in the work of the profit.
"Cleaning" the portfolio
Accounts that are consistently losing money should be removed from the portfolio and replaced with new ones.
In conclusion, we can say that investing in PAMM accounts becomes a reliable method of obtaining passive permanent income in case of choosing the right successful traders, compiling a portfolio and adhering to the right investment tactics. This is the key and the only factor on which the profit received by the investor depends.
Video lecture from an expert:
Hello blog readers! The work of an investor is largely a game of prediction: will the price chart rise / fall in the future? And when it comes to money, it's very easy for a person with no experience to "get on the wrong horse" and lose their investment, and this can happen within one day.
Recently, the idea has come up to analyze leaked PAMM accounts to understand what they have in common. I wanted to find out for what reasons significant amounts of investments of investors are lost - and tell you about it!
If someone is not in the know, drain PAMM accounts are a sharp drop, up to -100%, which essentially leads to the loss of deposits of all participants in the process. Here's what it looks like:
Imagine for a second that there is no collapse yet, how do you like the schedule?
Beauty indeed! And such a "setup" in the end ...
Happy reading! At the end of the article, you will learn a little to predict the future :)
Before moving on to the content of the article, I suggest subscribing to my channel in Telegram. Subscribers receive additional information that is not on the site: notes on various topics, weekly reports, news reviews, answers to readers' questions, polls.
Statistics on merged PAMM accounts
For analysis, I selected 50 PAMM accounts that were closed in 2017-2018 due to a drain. The sample is not to say that it is large, it will not pull on a fundamental scientific article, but in order to draw certain conclusions it is quite enough. PAMM accounts were quite popular among investors - the investment mark reached at least $ 15,000 or the equivalent amount in another currency.
I collected all the collected information in an Excel file that you can download.
Before moving on to analytics, I would like to offer you some generalized statistics. For example, there is an opinion that the higher the capital of a manager, the more responsible he is in his work, which means that the probability of draining is lower. And here's what the situation really is:
The number of merged PAMMs depending on the capital of managers
As you can see, larger amounts of guarantees do not give any. And this is not surprising - the mark of $ 3,000 allows the manager to reach the upper echelons of the rating in Alpari, which means to attract more investors and reach a plus even with more serious investments.
The second interesting point that I wanted to check is how long do the accounts that merge as a result usually live? In some ways, this echoes my article about search, where we looked at how many “survivors” remain after 3,6,9,12 months of trading. And today we look at the number of "dead":
The number of merged PAMMs of different ages
I explain the graph: the left columns are the number of merged accounts, the right columns are the number of accounts in general in the age segment (numbers are percentages of the total). And this is what we see:
- half of the merged PAMM accounts did not last even half a year, although it should still be noted that 2/3 of the accounts are, in principle, less than six months;
- in the period from 7 am to 12 pm and especially from 1 pm to 6 pm, the number of drains significantly exceeds the share of PAMM accounts in general in this segment;
- PAMM accounts with an age of 18 months or more merge much less often, despite the fact that their share reaches 20%.
In general, nothing unexpected - the old PAMM accounts do not merge because they use less risky trading strategies that allow you to stay afloat for a long time.
In fairness, I must say that draining a PAMM account is not always so bad. Some ymeltsy manage to disperse their accounts to hundreds and thousands of percent yield. Thanks to them, you can earn a lot of money using the principle, but this is risky and often ends badly. It is worth using "drain" PAMM accounts only with timely withdrawal of profits, when the loss of the initial deposit no longer plays a big role.
The higher the monthly yield, the faster the end of the PAMM account will come. This relationship is confirmed mathematically - it is -0.4, that is, there is a strong inverse relationship. The reverse is also true - the lower the monthly yield, the more reliable the PAMM account. All this is perfectly demonstrated by the graph:
The ratio of profitability of PAMM accounts and the time until they are drained
PAMM accounts on the left side of the graph "live brightly and die quickly." In fact, this is roulette - but you can earn money on it with due luck. In order to last longer than a year, managers have to moderate their appetites and trade with a smaller lot, but drains still happen, because over-profitability is just one of several signs of a dangerous PAMM account, after studying the list, I can definitely say that there are others.
Signs of potentially draining PAMM accounts
The first thing you should pay attention to is the chart used, it is located on the "Trade" tab on the official page of the PAMM account. Looking at this chart, you can see several signs of a possible drain in the future.
V 80% In cases of merged PAMM accounts, there is a noticeable imbalance on the ICP chart, there are jumps from 10-20% to 100% and higher:
In many cases, these jumps are due to the use of , which itself leads to a drain in 100% of cases.
Slightly less likely 76% there is such a sign - the used leverage at least once exceeds 100%. In practice, this means that the manager has at least once put his PAMM account in a "make or break" situation - when survival actually depends on luck.
On the 36% of merged PAMM accounts, there is a rather dangerous trading technique overstaying- when, with losses, the manager does not close the deal in a minute, but sits in it for days, weeks, sometimes even months and waits for the price to turn in the right direction. This often works, but not always - and then the losses can be fatal:
The usual PAMM account yield chart gives quite a bit of information about the potential risks of a drain, but there is one case where the sad end is obvious - straight line graph practically without drawdowns (may turn up a little at a yield of 1000%+). This sign met y 40% PAMM accounts:
A couple of times I met a similar scheme, only the trade does not go on all the time, but once every few days, so it turns out not a straight line, but a “ladder”:
Another sign that is often found on merged PAMM accounts is an empty declaration, in 46% cases:
In my opinion, this can mean two things:
- the manager does not take his job seriously or is not a professional - informing investors is an important part of his job;
- the manager knows that the account will be drained sooner or later and sees no point in making promises that will be broken.
The last and rather obvious sign remains - if there are at least a few merged PAMM accounts in the manager's archive. Over the past year, comrade TOPMASTER excelled the most - 9 merged accounts with investors' capital of $15,000+ and as many as 135 in the archive :) According to fastpamm.com, the trading result of this manager is minus 511 thousand dollars!
By the way, a negative result in trading can also be a sign of the use of dangerous strategies. I did not specifically check for this article, but this may well be true, so I give you a tip.
textbook plums
If ever a textbook on investing in PAMM accounts is written, this section will be there, because you need to study history in order not to make mistakes in the present. This also applies to investment.
Homework
Since the article is not only about analytics, but also about, I give the opportunity to consolidate knowledge. Complete the task:
Draining a PAMM account with investors' money is not a fun event, and it happens almost every day. And when the markets are in chaos, tens and even hundreds of thousands of dollars can be lost in a day. Someone may consider this an acceptable risk when investing, someone may not, but the main thing is that the investor clearly understands that such a situation is possible.Let's go over the main signs of potentially draining PAMM accounts again:
- super profitability;
- fluctuations on the chart of used leverage;
- use of ICP 100% and above;
- sitting out losses;
- graph straight line or ladder;
- empty declaration.
I recommend going through your PAMM portfolio and checking if there are any potentially draining PAMM accounts in there - maybe you go to remove them or reduce the share in the portfolio. At the same time, please vote:
1
In my opinion, the article turned out to be interesting and useful :) If you think the same, then I ask you to tell your friends about it on social networks:For you, this is a minute of business, and for the blog it is a good help in development and stimulated me personally to make new interesting articles for you.
Well, it seems to have said everything :) Profit, comrades!
(add me to friends
Greetings, guests and readers of the blog! The past year was marked by important events for Russian Forex traders. The license of the Central Bank was received by two brokerage companies: Forex Club and Alpari.
This means that the process of formation of a civilized forex in Russia is underway. It is possible that the result will be a new increase in the popularity of this type of income. Therefore, we will from time to time analyze the popular questions of beginner Forex investors. Today's question is: "PAMM accounts - what are they?"
The name PAMM is a transliteration of the English abbreviation PAMM from Percent Allocation Management Module (percentage allocation management module). The title clearly needs clarification.
In simple words, PAMM is a solution in which a trader (he is called a manager) offers those who wish to become investors to receive profit in proportion to the share in the total capital of the account
This offer, which lists the conditions for investors, is called an offer. A typical offer may include the following sections:
- Account currency
- Percentage of manager's remuneration (usually depends on the amount invested)
- Minimum investment amount
- Conditions under which withdrawals may be temporarily frozen
For his services, the manager receives remuneration from investors. Typically, the manager's remuneration is in the range of 30-50% of the profit: the higher the invested amount, the lower it is.
In addition, the brokerage company on the basis of which the account exists provides statistics that reflect the profitability for the selected time interval, maximum drawdown, account age, and some other parameters.
This statistic is used by potential investors to select the best manager from their point of view.
Are those who talk about deceit right?
Not all forex brokers provide PAMM platforms. Among the most famous, it is worth mentioning Alpari, InstaForex, Forex4you.
Unfortunately, all these companies provide too limited information as part of the rating of their PAMM accounts.
New investors tend to be clueless and think that yield, maximum drawdown, and account age are just about everything you need to know to make an investment decision. Now you make sure that .
Imagine that some account shows a "ladder" of profitability: a month with a profit of 10% is replaced by a month with a loss of 5%. Then the annual return will be 30%. If the manager's remuneration is 50%, it may seem that the investor will eventually receive 15% per annum.
Nothing like this! For a profitable month, he has half the profitability of the account, i.e. 5%. During a losing month, he loses these 5%. This will be repeated constantly, and at the end of the year he will be without profit.
It is very likely that this investor will “check in” on one of the forex forums, where he will leave his.
However, there is no cheating here.
The distribution of profits and losses between the investor and the manager does not always leave the investor with the opportunity to make a profit. Alas, the rating systems of PAMM accounts adopted by forex brokers do not reveal some mathematical details.
There is a way out of this difficult situation, but the investor needs to know something else beyond the available information. This additional information is the ratio of the average monthly return of the account to the downward risk, called the Sortino ratio.
Without going into details, we can say that the Sortino coefficient serves as a measure of the stability of the account, the uniformity of its growth. The higher this indicator, the higher the investor's chance to make a good profit.
This information is not provided. True, there is one exception. Alpari partners have created a site pammin.ru with extended statistics. The proposed set of parameters has absolutely everything that an investor needs.
Pros and cons of investing in PAMM
The emergence of PAMM accounts has become a very important event in the development of trading in the forex market.
This is by far the simplest and most effective investment opportunity for those who do not have a lot of capital to conclude a contract with a professional asset manager. At least that's what most newcomers think when they're wondering where to start their journey to millions.
No experienced trader will be interested in $100. At the same time, smaller amounts can be invested in PAMM. Another important detail: a brokerage company that has its own PAMM platform acts as a guarantor of the investor's interests.
For example, if a trader turns out to be a fraudster, he will not be able to appropriate investors' money thanks to a simple mechanism: the manager's own capital and the profitability of the account are known. This means that the manager has a specific amount at his disposal, which belongs to him personally, but not a cent more.
But, like any type of investment, they carry a potential risk. It is connected mainly with the fact that even the most effective manager is not immune from mistakes.
High returns in the past are no guarantee of the future. Therefore, if funds allow, it is much safer to form a portfolio of deposits in several PAMM accounts with different management strategies.
There are also risks associated with unscrupulous forex brokers, from time to time there is information about the closure of another “kitchen” that is not available for interbank trading.
To date, investing in PAMM accounts is the most affordable type of investment in Russia. And its popularity is due to the ease of opening an account with a broker.
It is interesting that this direction is almost unknown in foreign forex, because. the legislation of a number of countries prohibits the management of assets without a special license.
One of the rare non-Russian PAMM platforms is the eToro social network for traders, which also provides brokerage services.
eToro has been a partner of Sberbank since 2016. However, the company's new project called ETORO-INVEST (a service for the formation of a highly profitable portfolio from PAMM accounts) and reviews about it do not inspire confidence.
Afterword
It's not the first time I talk about this topic. But, judging by the statistics of search queries, interest among novice investors is only gaining momentum.
More experienced investors, having played enough with pseudo-investments, are gradually moving to real professional instruments - securities.
And all because, in fact, the threshold for entering the stock market is not so high. You can buy your first block of shares for a couple of thousand rubles, and bonds are available from 1000 rubles. a piece. Add here and now it has become possible to get practice in a simple and accessible form without worrying that tomorrow your broker will disappear taking your deposit. And this is a separate large and important topic.
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The PAMM service is a product that can satisfy the needs of any investor who wants to make money on Forex without independent trading.
All you need is to choose the right conditions, a successful manager and just get your passive income from Forex trading without understanding everything. Therefore, today we will talk about how to use this service correctly and where is the best place to open PAMM accounts, so that the result of such investments coincides with expectations.
Open a PAMM account on Forex?
By its principle of operation, this account is a percentage distribution control module, that is, a kind of mechanism with the help of which a method of private investment in Forex is implemented on the broker's trading platform. In simple words, this is an investment account managed by a successful trader, accepting investments from investors in their own trading and receiving weekly interest on the earned profit.
Thus, traders who already have sufficient experience for profitable activities can attract investors and earn much more than trading solely with their own money. At the same time, investors who absolutely do not know how to trade on their own can invest in one. At the same time, everyone has their own benefit - the manager receives his commission from successful trading operations, and the rest of the income is distributed as a percentage among investors in proportion to their investments.
How to choose a PAMM account
Any Forex broker that provides this investment product on its trading platform has a rating of managers. And here you should be aware that the manager of the invested funds is a trader who earns on Forex by trading on his own. And the more professional his skills, the less risky his activities will be, and your investments will be more profitable.
Thus, when choosing a suitable manager for yourself, you should pay attention not only to the profit that the trader earned while managing the PAMM account, but also to the risks that were present in his trading. That is, first of all, you need to compare the profitability and trade drawdowns of the manager in combination with a number of additional criteria, and only then make a decision whether it is worth investing or not.
Now about everything in order:
Account lifetime
You should pay attention only to those accounts that have been operating for more than a year, that is, you need to invest in a manager who has already proven his own effectiveness. After all, the market is always changing and many strategies stop working, so often those who received more than 15% per month do not withstand the market dynamics over time. An account "experience" of more than 1 year is an indicator that a trader is able to earn income under any market conditions.
Profitability
It should be borne in mind here that it is unrealistic for a manager to earn over 150% of profit just like that. A PAMM account profitability of over 150% is an indicator that a trader uses aggressive trading systems in combination with averaging tactics and without order insurance. Of course, the profitability of such an account can be fantastic, but this increases the risk that tomorrow, if a trader neglects risk management in trading, then such an account will not live long. Therefore, you should choose an option with an annual yield of no more than 100%.
Maximum drawdown
An acceptable drawdown of an investment account is considered to be no more than 20%. A high level of drawdown is an indicator of the manager using more than 2% of the amount of capital per trade, or using "grid" strategies and systems with Martingale. This option is not for us, because if a trader is constantly taking big risks, then his deposit will soon “be covered with a copper basin” or simply pick up losses.
Trade Stability
Does the account exist for a long time without a single unprofitable week? He is also not to be trusted. The bottom line is that traders who trade without stops usually have such indicators, and they average out losing trades, which is fraught with unpleasant surprises in the form of a serious drawdown or a complete “drain”. Therefore, along with high profitability, a trader should also have unsuccessful weeks, which will be an indicator that the manager is not cheating. Therefore, with the overall profitability of a PAMM account, it should also contain rare small weekly drawdowns.
Manager's capital
In the rating, you can often see managers with a large amount of funds - this means that the trader is confident in his abilities. But you can also find a deposit where the manager has thrown the allowable minimum, and quickly withdraws all the profit - that is, the entrepreneur is not confident in his skills and is trying to avoid losses. Therefore, you should trust a trader who, along with the money of investors, manages his own large capital.
FOREX brokers with PAMM accounts
Today, the PAMM investment service can be used by more than 10 brokerage companies operating in Runet - In this regard, you should be guided by the classic criteria for choosing an operator:
- the presence of regulation - of course, almost everyone has it offshore, but it is better that it be CySEC
- payment policy of the company - on the forums it is better to ask how the company withdraws funds
- no extra bonuses - if the company offers huge bonuses, then the broker is drowning and trying to attract customers
- reviews about the broker - the general background of reviews should also be positive
Having chosen several reliable dealers, it is worth evaluating their conditions. Since the principle of operation of PAMM accounts for each Forex broker is almost the same, everything will depend on how much money you have. In addition, other investment conditions are specified in the manager's offer, which may be different for each account.
For example, the well-known company Alpari allows you to invest an amount of $ 10, which is available to everyone today.
In addition, the dealer also offers "wholesale" investment in PAMM portfolios, which consist of several accounts (minimum investment 100 USD). The company has already applied for a license from the Central Bank, which increases its reliability rating.
The PrivateFX broker also offers excellent conditions. Here you can become an investor with an amount of $ 20 for a period of 1 week. In addition, the operator offers to invest in indices, on which investors' funds are distributed from 3 to 10 PAMMs - a minimum amount of 100 US dollars, for lines of 2 weeks.
Since investing is the main activity of a broker, you can meet many professional managers on its trading floor.
Another broker with excellent conditions - Instaforex . The minimum investment amount in a PAMM account is from $10, while you can use advanced analysis tools.
This broker will also receive a license from the Central Bank of the Russian Federation in the future, which allows it to be considered as a potential option.
Risks when investing in PAMM accounts
Investing, along with financial trading itself, is a risky activity. To reduce the level of risks, follow a few simple rules:
- Diversify risks - invest in several accounts at once. So that your profit does not depend on the success of just one person, select 5-7 best managers and distribute your investments between them. In this case, even if 1-2 traders lose your capital, you can easily cover all losses at the expense of the profits of other entrepreneurs.
- Invest with a strategy that can significantly reduce drawdowns and maximize your income.
- Choose managers wisely - do not chase mega profitability, but choose the optimal ratio of all parameters.
Thus, this service is one of the most attractive for modern investors. And the main thing is to competently approach this issue and thoroughly analyze the work of the account and the brokerage company itself before investing your funds.
Last update: 03/22/2020
Reading time: 14 min. | Views: 10256
Good afternoon, dear readers of the financial magazine "site"! Studying various ways of investing money in order to generate income, one cannot ignore the PAMM account. It is about them that will be discussed in this article.
From this post you will learn:
- What are PAMM accounts and how does it work;
- How to open your PAMM account and in which companies is it better to do it;
- How to choose the right PAMM account for investment;
- What risks does an investor bear when investing in PAMM accounts.
In addition, at the end of the article you can find answers to questions that most often arise when deciding to invest in PAMM accounts.
The presented publication will be useful not only for those who have decided to use PAMM accounts in their work. It is also useful for those who decide to improve their financial literacy, as well as those interested in various ways of investing, including.
About investing in PAMM accounts, what it is, how to choose and where it is better to open a PAMM account, what reviews can be found about PAMM investments in Forex - read about all this in this issue
Many seek to find a way to earn decent money without having to visit the office. Few people like to give all their strength and skills to someone else's company. That is why, having reached a certain experience and knowledge, people begin to look for those that practically do not depend on the efforts made.
PAMM accounts are a financial instrument with a high degree of reliability and profitability. It is enough to have several such accounts in order to regularly receive a good profit by making minimum effort . However, before taking advantage of this opportunity, it is important to understand what are the features of such a financial instrument, as well as how best to use it.
First, we give a definition that is given in scientific financial works.
So what are PAMM accounts?
PAMM account is a certain mechanism for using a trading account, with the help of which you can transfer funds to a professional manager in trust management for the purpose of carrying out financial transactions on various exchanges.
Abbreviation PAMM (PAMM) derived from the English phrase Percent Allocation Management Module . Literally translated into Russian, it means percentage distribution management module.
Many are frightened by such abstruse definitions. Therefore, it is useful to consider the principle of operation of a PAMM account using an example.
illustrative example
Suppose an investor has a certain amount of free cash, for example, $10,000. He would like to increase them, but he does not have the time, experience and desire. At the same time, he knows that his good friend is involved in trading on. To do this, he uses not only personal funds, but also attracted capital.
The investor decides to transfer his money to the management of the trader for one month, provided that he will deduct a certain percentage of the income earned on them.
Eventually across 30 days the investor will get back the invested funds with dividends (for example, 20 %). That is, in the end he will receive his 10 000 $ + 2 000 $ . At the same time, the manager for successful activities will be rewarded by paying him a commission.
In simplified form, this is what it looks like. operation of PAMM systems. That is, the investor's funds are transferred to an account that belongs to the manager. He implements. At the same time, the number of investors who transferred funds for management to one trader is not limited in any way.
advantage this type of investment is the absolute transparency of all actions carried out by the manager.
When investing in PAMM accounts, all transactions carried out by a trader are tracked in automatic mode. At the same time, the broker who provided the trading platform makes sure that the transactions being made are legal and that the rights of investors are not violated.
PAMM accounts - how it works
2. How a PAMM account works - the principle and scheme of a PAMM account
It turns out that PAMM accounts represent a certain investment service. It allows investors to make a profit without carrying out independent operations in the Forex market. At the same time, the manager receives a certain income for providing investors with services for managing their funds.
Let's take a closer look at how PAMM accounts work.
2.1. The principle of operation of a PAMM account - 4 main stages
There are several main stages in the work of PAMM accounts.
Stage 1. Opening a PAMM account
The manager decides to open a PAMM account. He selects a brokerage company that provides such an opportunity. You can find it in the previous article.
The broker opens a special account for the manager, which is called PAMM. After that, the manager deposits a certain amount of money on it. It represents the capital of the manager.
With these funds in the process of trading, he will risk in the same way as with the money of investors. That is, the manager's capital is a certain insurance against the trader's rash actions.
Stage 2. Offer creation
After the PAMM account is opened and the funds of the manager are deposited to it, he publishes offer. It is an offer to investors to deposit funds to a PAMM account.
The offer must contain the following information:
- the minimum amount of investment in the account;
- within what time it is impossible to withdraw the invested funds;
- the percentage of profit that will be transferred to the manager as a remuneration.
Stage 3. Investment in PAMM accounts
Investors spend analysis existing PAMM accounts. To do this, they use an independent rating.
Having decided on the choice, the investor deposits money on the PAMM account, which seems to him the most successful.
Stage 4. Income generation
The manager, using his own, as well as the funds invested by the investor, trades on the Forex currency market.
At the same time, the loss and profit that are obtained during trading are automatically redistributed between all account participants: managers and investors.
Distribution is carried out in proportion to the shares of each participant.
2.2. Scheme of PAMM account operation (with visual drawings)
First of all, the manager opens a PAMM account. Then he decides on what conditions he would like to cooperate with investors, prepares an offer.
After that, he starts trading using his own funds. Investors, having seen the profit that the trader managed to earn in the process of trading, decide to invest in a PAMM account.
Now the manager carries out trading operations using not only his own funds, but also the money of investors. At the same time, the more profitability he shows, the closer to the top his account will be in the overall rating.
If the manager achieves profit during the trading process, the amount on the PAMM account increases.
At the same time, the profit is distributed among its participants in proportion to the amount of funds invested initially.
Each investor gives a part of the profit received to the manager as a commission.
Thus, the operation of a PAMM account in a simplified form can be shown in a table using specific numbers. This will greatly facilitate understanding.
| Account members | Amount of invested funds | share | Profit | Commission (20% of profit) |
| Manager | 300 $ | 60% | 600 $ | — |
| Investor 1 | 100 $ | 20% | 200$ | 40 $ |
| Investor 2 | 60 $ | 12% | 120 $ | 24 $ |
| Investor 3 | 40 $ | 8% | 80 $ | 16 $ |
| Total amounts | 500 $ | 100% | 1500 $ |
PAMM portfolio - what is it and how does it work
3. How the PAMM portfolio works - the principle and scheme of the PAMM portfolio
PAMM portfolio represents several PAMM accounts combined into one. This type of investment helps diversify risks, which the investor bears during the investment.
This becomes possible due to the fact that in portfolio investment, the investor selects multiple PAMM accounts, for which the ratio of profitability and the level of risk, as well as the amount of investments for it, are optimal.
3.1. The principle of operation of PAMM portfolios - 4 consecutive stages
Considering the principle of the PAMM portfolio, it is advisable to consider several successive stages.
Stage 1. Portfolio formation
The manager forms a portfolio, which includes multiple PAMM accounts. After that, he invests his own funds in the resulting portfolio, due to which he will be more prudent.
The manager has the ability to change the composition of the portfolio, including new PAMM accounts and excluding old ones. You can also change the shares of different accounts in the portfolio.
Stage 2. Investments
The investor analyzes the information provided on the broker's website on the performance of various portfolios. Having chosen the one that seems to him the most effective, he invests in a PAMM portfolio.
Stage 3. Trading
On PAMM-accounts, which are part of the portfolio, trading is carried out by opening and closing transactions in the Forex market.
Stage 4. Profit distribution
After a while, a financial result is formed on the PAMM portfolio (profit or loss). It is distributed among the portfolio participants in proportion to their contribution to it.
The manager, in addition to a part of the profit, receives a commission, which is paid to him by investors.
3.2. Scheme of work of PAMM portfolios (with visual drawings)
The functions of the manager at the initial stage include:
- create a PAMM portfolio;
- determine under what conditions investors will be able to participate in it;
- invest your own funds and start trading.
Investors evaluate PAMM portfolios in terms of the profitability that it has shown since its inception, the level of risk, as well as the terms of cooperation. In accordance with these criteria, they choose the portfolio that is optimal from their point of view and invest in it.
All the money that was invested in the portfolio is distributed among the PAMM accounts that the manager has included in its structure. At the same time, the manager can at any time change the composition of the portfolio and the shares of the accounts included in it.
Trading is carried out on PAMM accounts, which are part of the portfolio. In the course of it, both positive and negative results can be added. This inevitably affects the profit or loss that portfolio participants receive.
Investors can monitor the status of the PAMM portfolio at any time from their personal account. You can also apply for deposits and withdrawals there.
The financial result that is formed on the PAMM portfolio is distributed among all its participants. If a profit was made, investors transfer a predetermined part of it to the manager in the form of a commission.
Thus, a PAMM portfolio is a certain set of PAMM accounts. The purpose of its creation is risk diversification, which appear in the process of investing in one PAMM account.
Opening a PAMM account - detailed instructions
4. How to open a PAMM account - a step by step guide for beginner investors
It is also important to discuss how to open a PAMM account for a novice Forex investor. It should be understood that There are three parties involved in the operation of a PAMM account:
- investor invests in it;
- manager who trades on the Forex market at the expense of the PAMM account;
- brokerage company or dealing center.
The success of investments is determined not only by the right choice of a brokerage company, but also by a well-conducted analysis of managers.
We can say that there is a distribution of functions:
- broker ensures that the manager does not disappear with the money entrusted to him, and also ensures that the distribution of profit and loss is adequate;
- manager conducts Forex trading and multiplication of funds invested in the account.
Step 1. Formation of a PAMM portfolio for investment
Any investor should remember that before To start investing in PAMM, you should decide on the structure of investments, as well as decide how much money he is ready to invest. In the language of financial terms, he must draw up an investment portfolio.
Important Rule , compliance with which will reduce the risks of investing, reads: should diversify investment flows.
In other words, the invested funds must be divided among several accounts. This will allow reduce investment risks and save money from loss.
In this regard, an investment portfolio is understood as a certain set of investments, a tool that allows the owner of the funds to maximize the profit received.
It is important to remember that investing all the money in one PAMM account leads to the fact that the risk of losing it increases many times over.
Step 2. Choosing a broker
When choosing a brokerage company, investors most often take into account:
- activity experience;
- reliability;
- how popular it is among other investors.
Absolutely all brokers can be included in the rating, they must meet certain requirements.
When choosing a broker, you should be guided by the following criteria:
- How long has the company been on the market?
- the profitability of the dealing company during the entire period of its activity, as well as in the last months;
- how many clients are registered with the broker;
- what are the conditions for opening accounts;
- how user-friendly the interface is;
- whether the broker has any achievements, including those confirmed by awards.
All of the above criteria are met this brokerage company.
Many believe that when choosing a broker, you can also focus on various reviews . But this is not entirely correct. Do not forget that many negative statements on the forums are not true. Often they are ordered by competitors.
Also, very often reviews are written by those who lost their money due to an incorrectly chosen strategy of behavior in the market, as well as when trading independently. But the loss of money by one of the traders does not mean at all that the broker is to blame, because he not responsible for the mistakes of newcomers.
Step 3. Registration
As soon as the brokerage platform is selected, you can begin to take action. But before you start investing, you need to go through personal account registration. To do this, you will need an email, full name and other data.
In this case, do not use fake data. At any time (especially if you need to withdraw funds), brokers can request confirmation of data by sending scanned versions of documents.
Step 4. Choosing a Manager
The choice of manager is the most important point in opening a PAMM account. On the website of any broker there is traders rating . When choosing, you should pay attention to those managers whose accounts showed the maximum profit over the past six months.
In this case, the following parameters must be compared:
- strategy;
- the number of funds entrusted to the manager;
- the total amount of money in circulation.
Step 5. Opening a PAMM account
It remains to take the last step - directly open a PAMM account. After that, it is important not to forget to transfer money to it.
Thus, it will not be difficult to open a PAMM account using the above instructions. It is important to remember that this method of investment should be used for a sufficiently long period. Therefore, it will not be possible to get a quick profit.
And the last tip - do not be afraid of drawdowns. It is important to understand that it is impossible to do without them if you participate in trading in the foreign exchange market.
Making the right choice of PAMM account for investment
5. How to choose a reliable PAMM account for investment - 8 simple but important rules
For those who decide not only to invest in PAMM accounts, but also to make money on it, it can be difficult to make a choice. A huge number of different accounts and traders can lead to a dead end.
However, if you follow a few simple rules, you can significantly increase the effectiveness of PAMM investments.
Rule 1 When investing in PAMM accounts, you should not chase super profits
If you choose to invest in accounts that once showed a huge income, there is a high risk of stumbling upon such a trader who considers Forex to be a kind of casino.
He conducts reckless trading without a specific plan, risking most of the funds in the account in one transaction. In such accounts, a huge percentage of profit shows only what the risky trader lucky. Wherein there is no guarantee that in the future his luck will continue.
It is best to focus on stable positive results over a long period. They can be much lower. But the risk of such investments is not so high.
Rule 2. Funds intended for investment should be divided among several companies
When investing in PAMM accounts, it is important to clearly understand that the investor becomes a market participant that carries a huge risk. He inevitably faces the possibility of losing the full amount of investments or part of it.
At the same time, every effort should be made to minimize this risk. That is why it is so important to distribute funds among several brokerage companies.
If you invest all your money in only one market participant (broker), in case of its bankruptcy, you can lose all your capital.
At the same time, if the capital is divided among at least four companies, only a quarter of the invested funds will be lost if one of them goes bankrupt. This, of course, is unpleasant, but most of the funds can be saved.
Rule 3. Do not invest in one PAMM account
This rule, like the previous one, is based on the need diversify risks.
To understand the principle of action, it is enough to give a small example:
When investing 1 000 $ in one PAMM account, if it is drained, the investor loses a thousand dollars. At the same time, if he distributes the same amount between five accounts equally, if one of them is drained, he will lose only 200 $ .
Rule 4. Bet on experience!
It is important to understand that you can gain experience in the Forex market only by trading for several years. Only in this case, you can develop the most effective strategy, deal with the nuances of trading, decide how to behave in difficult situations.
You should not invest large amounts even in very successful young accounts. It is best to pay attention to those PAMM accounts that are active 1 -2 of the year.
Rule 5. An important score indicator is stability
When looking for accounts for investment, you should pay attention to those that bring stable profit. Do not forget that the presence of a large profit today does not guarantee that it will be tomorrow.
At the same time, a stable positive result from month to month allows us to judge the quality strategy of the manager. There should not be huge drawdowns on the account.
Rule 6. Remember the psychology of a trader
When investing in PAMM, do not forget that an ordinary person manages the account. Therefore, it is important to take into account some psychological points.
An important rule is not to invest more in the account 5-10 % of the amount that the trader manages at the moment. A sharp increase in the volume of the deposit can play a cruel joke. The trader will be under too much psychological pressure, which he may not be able to withstand. As a result, the risk of draining the deposit increases significantly.
Rule 7. Martingale is fraught with great danger
In the Forex market, a fairly popular strategy called martingale . There are a huge number of its varieties, but the essence of all is the same - after closing a losing trade, a new one is placed in the same direction, but with a doubling of the volume. The experience of a huge number of traders has proven that the martingale strategy is always unprofitable over a sufficiently large time interval.
Investor NOT it is worth investing in a PAMM account, the manager of which is guided by the strategy in the trading process martingale, because this greatly increases the risk of draining the deposit.
Naturally, no trader is aware of what strategy he uses. Therefore, it is important for an investor to know the ways that help calculate the martingale.
Consider the simplest of them:
- Large brokers in the account information provide information about the leverage used. If there are periods when there is a full load in the trading process, this is one of the signs of the use of the martingale.
- Opening multiple trades with ever-increasing volume in the same direction on the same currency pair can also be a sign that a trader is using a martingale.
- Another sign of the application of this strategy is the suspicious stability of profit. Even after a significant drawdown, the account generates income, and usually for the same amount.
Rule 8. For investments, it is best to choose PAMM accounts in which the share of the trader's own capital is quite high
Some investors believe that the proportion of a trader's equity in an account is irrelevant. But this is not entirely true. Anyone who has invested a fairly substantial amount of their money will not risk it thoughtlessly.
In addition, there are times when the broker colludes with the trader to drain the deposit. One of the signs that it will happen soon is high profits with a very small share of equity.
Thus, sometimes it is not easy to decide which PAMM account to invest in. However, if you follow simple rules, the probability of choosing the ideal option for investments increases significantly.
6. Where is the best place to open a PAMM account - TOP-5 verified companies + comparison table
From the information presented above, it is clear that PAMM accounts act as a way for the manager to interact with one or more investors, the purpose of which is to make a profit and increase capital. In this case, all operations on the account are carried out v online mode, that is, investors have the opportunity to track in real time how the amount of funds invested by them changes.
Investments in PAMM appeared relatively recently. But they quickly gained immense popularity. That is why competition in the PAMM account market is constantly growing.
To date, a fairly large number of brokers offer this service. That is why reviews of the best of them, presented by professionals, are so useful.
Company number 1. Alpari
Alpari is the largest platform for operations with PAMM accounts in Russia and the CIS countries. The company began to engage in operations in the foreign exchange market v 1998 year.
Today, the amount of funds transferred to trust management through Alpari is almost $15 million. The number of investors who have invested in PAMM accounts with the help of this broker has already exceeded 50,000. Their total profit has exceeded three million dollars.
By choosing Alpari, investors can count on informational support. In addition, they get at their disposal a constantly updated rating of PAMM account managers.
Company number 2. InstaForex
According to most experts, InstaForex broker has a very high level of reliability. The dealing company has been operating on the market since 2007 and consistently occupies the highest positions in the ratings.
InstaForex has repeatedly been awarded the title of the best Asian broker operating in the Forex market.
On this site, traders can get:
- free consultation;
- video tutorials on trading;
- access to a huge database of analytics and statistics.
Company number 3. ForexTrend
ForexTrend company defines its mission as follows: to introduce the newest and most modern, as well as civilized ways of trading on Forex. To this end, the conditions and services provided to customers are continuously improved. In addition, ForexTrend makes every effort to popularize new tools.
In 2013, the company received an award as best PAMM broker, which provides an opportunity to invest in PAMM accounts.
ForexTrend in this area provides investors with the following services:
- investment advice;
- rating of PAMM accounts created on the site;
- continuous monitoring of existing PAMM accounts.
Company number 4. Alfa-Forex (Alfa-Forex)
At the time of its creation, the management of Alfa-Forex set itself a long-term goal: to win the status of the best broker in the Forex market in Eurasia. It was this site that was the first to provide the opportunity to use the terminal for trading MetaTrader 5 .
The main goal of the company in the process of working with PAMM accounts is stability and transparency. Managers on this site receive commissions only if a positive financial result has been achieved.
Company number 5. Forex4you
Forex4you is an international broker with global goals. In his work, he tries to ensure the maximum competence of employees, as well as to be absolutely honest with his clients.
Forex4you independently develops unique trading tools and regularly introduces various latest technologies. Investors who decide to cooperate with this company can withdraw profits automatically.
The table below will help you compare the brokers in the TOP-5 more clearly.
Comparative table of companies with PAMM service or automatic copying of transactions:
| No. Broker | Average rate of return in % | Distinctive features |
| 1. Alpari | About 50 | One of the very first sites in Russia |
| 2. InstaForex | Above 30 | You can invest a very small amount, starting from 1 $ |
| 3. ForexTrend | 46-59 | The investor can choose from a large number of both aggressive (with high risk and return), and conservative (low risk and low profit) strategies |
| 4. Alpha Forex | 25-75 | You can invest 24/7 |
| 5. Forex4you | Above 25 | The manager has additional responsibility |
7. Reviews and opinions of investors about PAMM accounts
There are a huge number of reviews about PAMM accounts on the Internet. They are very varied. Alone claim that they managed to earn a lot of money on this method of investing. Other scold PAMM accounts, calling them fraud and deception of ordinary people.
It is important to understand that PAMM investments are often scolded by those who did not bother to understand them before investing. Such investors have no idea how the account works.
Moreover, they do not understand how to choose PAMM accounts, as well as what can be expected from such investments.
It is not uncommon for reviews to be simply bought by competitors. Their goal is just to throw mud at other brokerage companies.
Understanding which feedback to listen to, which of them are real, is often difficult. Therefore, many investors doubt whether it is worth investing in PAMM accounts.
In this case, only one piece of advice can be given: it is best to trust not words, but statistics and facts. Only they can reveal the real truth about PAMM investment, showing potential returns and risks.
It is also useful to familiarize yourself with (this is one of the possible options for investing money).
