PAMM-accounts - this is the delegation of management of their assets and passive earnings from investments. PAMM accounts are defined as trading assets that are managed by expert traders with positive hands-on experience, and not by investors themselves. It means that all activities are carried out by a professional trader. In this case, the investor doesn’t need to perform any operations on his own.It is enough to open an account with a broker and select a trader to whom the funds management will be delegated. The investor has only to regularly monitor the effectiveness of the trader who manages his assets. Thus, investing in PAMM accounts is a relatively safe and convenient alternative for those who are not knowledgeable in the sphere of finance. This type of accounts is offered by large brokers and today is an alternative means by which any investors, even those who know little financial markets, can invest in Forex and make a significant profit.
A PAMM-account is a potential opportunity for all traders. Some can open a PAMM account and become a manager. Others, remaining independent investors, invest funds through a PAMM-account under the trust management of more experienced traders. The great advantage of managed PAMM-accounts is that they allow even individuals without specific professional knowledge of how to operate on Forex, invest and use huge potential for profit.
As for the amount that an investor should attract, this depends to a large extent on the individual contract with the broker, since in some cases the minimum amount is only $100, while in others it can reach $10,000. For this reason, each person should look for an option that best suits his budget.A broker offering a PAMM-account service becomes an intermediary between investors and account managers who offer their services for conducting operations in financial markets. In this case, the profit received as a result of transactions is divided between the investor, the broker and the manager depending on different percentages. To better understand how this works, we'll look at the following diagram:
At this stage it is necessary to explain that in fact the account manager or trader doesn’t manage the trading account of each investor separately (if this isn’t their responsibility). A professional trader should merge into a single account (the PAMM-account itself) the accounts of investors under his leadership, that is, investors who have chosen him for managing his funds. As mentioned above, each investor who opens a PAMM-account selects a management manager that combines the funds of all accounts of his clients in one account with which he will conduct transactions on the market, in accordance with the criteria specified by investors.
It is important to know that your money doesn’t come directly to the broker and/or trader, they have indirect access to them. Only at the time of making transactions, a trader has the right to make any transactions with the investors' funds available to him. Just so take and withdraw from the account of existing assets it will not work. This is a security guarantee for investors of PAMM-accounts.
Also, without a long explanation of the reasons and circumstances, the investor has the opportunity to withdraw from his account any amount and withdraw them. In theory - this isn’t a very pleasant fact for the managing person, but, in fact, doesn’t affect the volume of trading and the opportunities for entering into transactions.
Advantages of PAMM-accounts
For investors, the PAMM accounts simplify the entire investment procedure, as they minimize risks. This is due to the fact that they use the knowledge of other traders who have experience in the market. Remember that the reality is that not everyone can invest in the market and receive a guaranteed stable profit, so the main advantage of PAMM accounts allows you to use the capabilities of those people who know how to do it effectively.
PAMM accounts are a form of auto-trading, as they allow any person to invest in the market without having to personally carry out trade transactions. The investor should only invest and allow the trader to work. For traders, PAMM accounts provide an opportunity to have access to more capital, increasing the opportunity for higher profits and gives them greater flexibility to work in the foreign exchange market.
As in any form of automated trading, PAMM accounts allow you to exclude the human factor (psychology) from investors, which is the root cause of failure when investing in the market. At the same time, this reduces the probability of errors and increases the speed of operations, as PAMM accounts are managed by experienced traders who work 24 hours a day from Monday to Friday to analyze the market and find new opportunities.
In general, a broker offering a PAMM-account to its customers provides the managers with the following conditions:
- It allows the trader to work with much larger amounts of assets.
- PAMM-account management platforms allow the trader to perform as many operations as he wishes, with few restrictions on the number and type of operations that he can perform.
- These platforms give the trader the ability to see all their operations in real time and be able to manage them without problems.
- PAMM-account earnings are paid automatically to each investor, so you do not have to worry about it.
- The investor has the right to withdraw his investments from the PAMM-account if he deems it necessary, unless an agreement is reached on the timing of investments between both parties. The manager cannot prevent the investor from withdrawing his capital at any time convenient for him.
Who is suitable for investing in PAMM accounts?
1) Beginning traders who don’t have the opportunity to independently trade on the foreign exchange market;
2) Investors who don’t have the opportunity to analyze the market and predict trend trends and even less to spend time on additional training;
3) Anyone who wants to earn money from available funds, but is afraid of losing them as a result of some incomprehensible actions on the part of the broker. PAMM-accounts are protected and your money, in fact, is only a pledge of the trustworthiness of the broker. The law obliges to protect the investor's money and in case of unsuccessful transactions to compensate for any losses.