Predicting the future: how to identify a pamm account that will “merge”? Pamm accounts - a divorce? why you should not invest, reviews Benefits of PAMM - investing
In the financial market, there is such a thing as a PAMM account. Many investors create for themselves and make a profit. How can you earn with this account?
What is a PAMM account?
A trader who has become a manager opens a certain type of account and invests his own funds there. Such investments are called manager's capital. And then he creates an offer, and under certain conditions, interested investors can invest their funds in the PAMM account of this manager.
Thus, it turns out that the manager trades not only with his own funds, but also with the money of investors who, at a certain percentage specified in the offer (terms of the offer), transferred their own funds to him for management. As a result, the manager risks not only the funds of his investors, but also his own. On the other hand, the manager receives a percentage of income for making transactions and managing investors' funds, that is, a PAMM account. Everyone who wants to earn, thus, chooses for himself such a manager who suits him according to certain parameters. The investor himself sets the selection criteria and limits his risks.
PAMM accounts as an opportunity to earn money
PAMM accounts: or is there no deception in this? To answer this question, you need to familiarize yourself with the conditions of earnings and see how it all works. To better understand whether these types of investments are a scam, that is, PAMM accounts are a scam or a real earning opportunity, consider an example.
Suppose a manager has opened a PAMM account with certain conditions that he offers to his investors. Then he trades on it. Investors monitor its work through monitoring, and, based on its results, determine for themselves whether it is worth trusting their funds to this manager. The received data suits them, and they invest in the PAMM account of this manager. And the latter continues to trade, but not only with his own funds, but also with the money of investors. His PAMM-account increases for and trading continues. If the manager is 300, and the funds of investors (one or several) are 200 dollars, then the total amount is already 500 dollars, and the manager manages this money.
The more successful his trading, the higher the rating of the manager, which means that more people will invest in his PAMM account. With the growth of the account, the funds on it also increase, and hence the profit for all participants, which is distributed in proportion to their investments. According to the terms of the offer, all investors at the end of the term (usually once a month) pay remuneration to the manager for successfully completed transactions. If desired, they can continue to cooperate.
Calculation of the investment PAMM account
To better understand: PAMM accounts - divorce or not, consider the following example. The initial amount is $500, of which $300 is the manager's funds and $200 is investor money. According to the results: 1500 dollars, profit 200%.
So, as a result of trading on a PAMM account:
- Manager: $300 investment, $980 result. That is, 300 - the initial contribution and plus 200% of the profit, plus a percentage of remuneration from investors, in this case - 20% of their profit.
- First investor: $100 investment, $260 result. Two hundred dollars - profit minus the manager's remuneration percentage, 20%.
- Second investor: $60 investment, total $156. One hundred and twenty dollars - profit and minus 20% for the manager.
- Third investor: investment $40, result $104. Eighty dollars - profit and minus 20%.
In the end, everyone was happy and profitable. The investment scheme is clear, and now everyone will be able to decide on their own whether PAMM accounts are really a scam or not.
PAMM account insurance
What are the risks, and in general - are they? The fact is that all investors have several types of insurance. If you think the PAMM account is a scam, then this is far from the case. There are brokers who insure PAMM accounts. This is the first type of conservation of invested funds. And the second can be called conditional insurance. Most likely, this is the minimization of losses, that is, losses. Under the terms of the offer, the investor can limit his losses on his own. What does it mean? The investor determines the level or any specific amount that he is willing to lose, but no more. For example, an investor determines that losses on his investments cannot be more than 20%. Or a certain amount, for example, from investment in losses cannot be more than 20 dollars.
Risks of investing in PAMM accounts
There are risks for the investor, and PAMM accounts are divorced or not, it is up to everyone who invested in such an account to decide on their own. In the example that was given above, the case was considered when the investment brought income. But in case of unsuccessful trading, all participants can receive losses. No one is completely insured against losses, that's why it is the financial market, which is always characterized by high risks. Any investor can limit them, but it is impossible to exclude them completely.
If we take the definition of a PAMM account, it would be unjustified to say a divorce (word) in relation to it. Before opening this type of investment, everyone who wants to invest is immediately warned about the risks. In addition, the following should also be taken into account: monitoring is, of course, good, you can track the trading of the manager and choose the best one for yourself. However, previous work on such an account does not guarantee future profitability. Suppose a manager receives a stable income of 40% for several months, but this does not mean that it will be the same in the future. Next month he may take a loss. Such risks can only be limited, but it is impossible for a PAMM account to avoid them. How risky it is, each investor has to decide for himself.
Passive income
Probably, any person wants to have earnings in the form of passive income. Of course, this is convenient: you can do any business and constantly receive extra money. Some people distribute their investments in such a way that they live only off them. Someone earns on various Internet projects, and someone invests in a bank and lives on interest. Everyone decides in their own way what kind of investment he should do.
Forex PAMM accounts - a scam for lazy people, or is it still a kind of passive income? Usually, people who do not want to understand anything, study anything, but are simply looking for a “magic income” that does not require any effort, are usually at a loss. In any financial field, you need to have elementary knowledge. If a person does not know anything about the system with which he wants to earn money, it is very easy to deceive him. Therefore, before investing somewhere, you need to find out what it is in general and how it works.
How not to be deceived with a PAMM account?
If a person wants to have income in the form of investing in a PAMM account, for this he needs to learn more about this type of activity. PAMM-accounts: scam or still real earnings? It all depends on which investment portfolio a person who wants to receive passive income chooses.
How to do it right?
- First of all, it is necessary to monitor all PAMM accounts that seem to be the most suitable. You need to view the profitability, preferably at least 1 year. The schedule for increasing profits should increase evenly. There should not be any sharp drops and jumps.
- Next, it is necessary to determine the risk threshold, that is, the amount that the investor agrees to lose in case of unsuccessful trading.
- You also need to look at the rating: the higher it is, the better.
The main parameters of the PAMM account:
- profitability (expressed as a percentage);
- working period (how long it exists, in months);
- profit uniformity (you need to look at the chart);
- rating.
Is it worth investing in PAMM accounts?
If the investor does a good preparatory work, then the PAMM account can become quite good, but only if the prerequisites that were described above are met. The better and more thoroughly the investor conducts an economic analysis, the more chances for earnings. It is imperative to learn all the subtleties and nuances on this issue, you can even undergo special training. There are various courses and programs for learning to invest.
If a person wants to make money on Forex PAMM accounts, they need to take specialized investment courses on PAMM accounts. It is on them that you can learn how to choose the right portfolio for yourself. The investment portfolio includes several PAMM accounts. How to properly distribute your funds and what methods to work with them, you can learn at such courses. Only after completing the training can you invest in PAMM accounts.
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 enter into 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 tries 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.
Is it possible to open a PAMM account on my own and how to do it? How to choose the best PAMM accounts for investment? What are the features of investments in Alpari PAMM accounts?
Hello dear friends! With you Denis Kuderin.
We continue the topic of private financial investments in profitable investment areas. The subject of the new article is PAMM accounts. Here I will share with you my personal experience on how to use this investment tool.
The publication will be of interest to novice investors and all those who wish to improve their financial literacy.
So let's get started!
1. What are PAMM accounts?
Do you want to know how to earn a regular income and still not go to work? I'm sure most readers will answer in the affirmative. Every reasonable person seeks to find such a source of financial income, which would be minimally dependent on labor costs.
PAMM accounts are among the reliable and highly profitable investment instruments. Having several such accounts, you can get a regular profit without spending much time.
But first you need to thoroughly understand what this financial instrument is and how to use it.
Let's start with a scientific definition.
PAMM account– there is a mechanism for the operation of a trading account, which allows you to transfer monetary assets to a trust management of a professional manager for conducting financial transactions on the exchange markets.
The term "PAMM account" itself comes from the English abbreviation Percent Allocation Management Module, which means Percent Allocation Management Module. Don't let such tricky words scare you - soon everything will become very clear.
Example
You have $1000 but no time or knowledge to multiply your capital. But you know that your friend Petya is engaged in profitable foreign exchange transactions, including those involving other people's investments.
You give Petya the money on the condition that every week he will give you interest on the profits. For a month of financial transactions, Peter not only returns you the amount invested, but also dividends in a predetermined amount (say, 25%). For the labors of a successful currency speculator, he receives a commission. The participants in the deal are happy to go home.
This is how PAMM systems work. Your assets are transferred to the account of the manager who conducts trading (trader) operations on the Forex market. The number of investors managed by one trader is not limited.
The main advantage of this way of earning is the complete transparency of the actions of the manager. PAMM accounts involve automatic monitoring of all financial transactions. The purity of transactions and the observance of the rights of the principal (investor) are monitored by a broker providing a trading platform for traders.
By choosing deposits to PAMM accounts, you stop "working for your uncle" - now "uncle" starts working for you!
Advantages of PAMM accounts:
- even a person with zero experience in Forex can start working with accounts;
- the minimum deposit amount is from $10;
- the principle of operation of the system excludes the withdrawal of money from the account by someone other than the investor himself;
- the depositor has the right to withdraw funds from the account at any time if he is not satisfied with the level of profit;
- each investor has a personal account from which he can monitor the status of his account;
- money is managed by professional traders.
Like other investment instruments, PAMM accounts are characterized by certain risks. Experts call the main disadvantage of such accounts the difficulty of choosing a reliable broker. The first rule of successful investment is a rational and sober approach to choosing a trading platform.
Read a separate article about what it is.
2. The principle of operation of a PAMM account - 5 main stages
Investing in PAMM accounts is the most affordable way for beginners to participate in currency speculation on the Forex market. However, this investment option cannot be called completely safe for capital, since the financial transactions of traders do not always bring profit.
To reduce risks, you need to act according to a pre-designed scheme. And most importantly: you can’t choose the first account that comes across for trust management - you need to look for a partner as carefully as possible.
Now about how PAMM accounts work.
Stage 1. The manager opens a PAMM account
A PAMM account operates on the basis of an electronic platform - a broker's website, which is also called a PAMM service. There are quite a lot of such services on the Internet - Alpari, InstaForex, AlfaForex, etc. Later we will consider the features of the most reliable and popular sites.
Successful traders with relevant statistics of exchange transactions become managers. It is clear that a speculator with a negative balance cannot claim the role of a trustee: the people simply will not follow him.
Stage 2. The investor finds a manager's PAMM account
Not all investors who decide to invest in Forex have the knowledge and experience necessary for successful trading. Moreover, 90% of beginners who decide to become independent traders suffer losses.
Transferring assets to trust management is a real way to avoid losses. At the same time, you do not need to understand all the intricacies and nuances of the foreign exchange market - the manager receives his commission for this.
The task of the depositor is to choose a reliable partner, focusing on ratings, reviews, experience and other objective factors that make it possible to judge the level of the trader.
Stage 3. The investor invests money in a PAMM account
Next, a successful trader encourages investors to invest in his account on the condition that he takes part of the future profit (for example, 20%) for himself. At the same time, the conditions for withdrawing money from the account by depositors are stipulated in advance.
Ideally, the investor has the right to withdraw his assets at any time, but sometimes there is simply nothing to withdraw, because at this moment the trader's account is in the status drawdowns.
Drawdown- loss on the trading account, expressed in numbers or percentages. Any strategy has a certain amount of drawdown, which also determines the degree of risk of the deposit.
The principals do not have the right to interfere in financial speculation, so all transactions are “on the conscience” of the manager. Investors can only track the statistics: it is provided by the platform on which trading is carried out.
Stage 4. The manager trades in the market
The manager trades on the currency exchange, using both his own savings and the money of investors.
Each trader has his own strategy - it can be aggressive, cautious, moderate or any other, depending on the temperament, experience and financial capabilities of the manager.
Dividends and losses received as a result of exchange transactions are distributed automatically between the manager and investors in proportion to the amounts deposited.
Stage 5. Withdrawal of earned money
The investor has the right to deposit and withdraw money from the account on any day when the stock exchange is open. There is no need to wait for the end of the month or other deadlines.
The mechanism for withdrawing money is simple: the principal fills out an appropriate application in his account, enters the desired value in the "withdrawal amount" field and confirms the order. Within 24 hours, the funds should go to your electronic or bank account.
3. How to open a PAMM account - step by step instructions for beginners
Now about how to open a PAMM account for beginner Forex investors.
There are 3 parties involved in the process:
- Investor.
- Manager (trader).
- Dealing center (aka broker).
The success of an enterprise depends both on the right choice of a broker and on a competent search for a manager. A reliable dealing center ensures that the manager does not run away with your money, and monitors the correct distribution of losses and profits. And an experienced trader is directly involved in multiplying the invested funds.
Step 1. Compiling an investment PAMM portfolio
Before you start working with the PAMM system, decide on the structure and size of your investments. In professional language, this is called "compiling an investment portfolio."
The first rule of safe investment is the diversification of deposits (separation of investments into several streams). Such manipulation will protect your assets from losses and reduce risks.
An investment portfolio is a set of your investments, a tool that allows you to get maximum profits. If you put all your money on one PAMM account, the risk of losing your savings increases many times over.
Step 2. Choose a company
When choosing a company that provides a platform for trading, be guided by its experience, reliability and popularity among other investors. All brokers are included in the rating of companies and must meet certain requirements.
The criteria for choosing a partner are as follows:
- the age of the company itself;
- broker's profitability for the entire period of work and for the last months;
- the number of broker clients;
- conditions for opening an account;
- convenience of the interface;
- awards and achievements.
You should not attach great importance to customer reviews on thematic forums - these may be the machinations of competing organizations.
In addition, reviews are usually written by those who lose money as a result of self-trading or incorrect financial policies. Brokers are not responsible for the mistakes of beginners.
Step 3. Register on the company's website
The trading platform has been chosen - the time has come for real action. To start investing, you need to register in your personal account on the broker's website.
You will need to enter personal data - name, address, mail, etc. I warn you that you should not use fictitious names and surnames: the company has the right to require confirmation of your identity at any time.
Step 4. Choose a Manager
We proceed to the most crucial moment - the choice of the manager. Each brokerage site has a rating of traders.
Choose those traders who have shown the highest profitability over the previous 3-6 months. Compare charts, strategies, number of investors and total investment.
Step 5. Open a PAMM account
The point is small - it remains to open a PAMM account and transfer your money to it. Managed accounts are a long-term investment vehicle, so don't expect immediate profits. And do not be afraid of drawdowns - this is an inevitable phenomenon in currency trading.
More about it in a separate post.
Before investing in certain traders, it is worth subjecting them to a comprehensive analysis. Check a number of indicators to find out if the selected player is worth trusting.
Each trader has a certain experience in the market. The larger it is, the higher the likelihood of stable profits. And vice versa: too “young” PAMM accounts are a very unreliable investment tool.
For example, if the account is not yet a month old, it is too early to judge its profitability. Each strategy has its own payback period: it will take time to evaluate the profitability of a particular trading method. The optimal period is at least 12 months.
Tip 2. Pay attention to the maximum drawdown indicator
Another indicator that requires mandatory attention is the drawdown. It shows what risks to expect. Beginners should choose traders whose losses over the past six months amount to no more than 40% of the amount of capital.
Indicators above this value are not yet a sign of disaster. Rather, it is evidence of the trader's aggressive strategy. But beginners should not risk capital by choosing such unpredictable partners.
Profitability is an indicator that should be monitored in parallel with the drawdown level. It means how much profit the manager receives for a long period of trading.
The yield of successful PAMM accounts should initially be higher than that of less aggressive financial instruments (bank deposits, mutual funds, gold deposits).
Example
Let's say a figure of 10% is too low for experienced traders and at the same time too unreliable for investors. But 50% or 100% return on investment is quite an acceptable result.
Tip 4. We analyze the amount of capital of the manager
The amount of the manager's own capital is another important indicator of reliability. The more money a trader has, the higher his interest in making a profit for himself and his investors.
Losses affect all account participants (including managers) in equal proportions. The solid capital of the "helmsman" is a kind of guarantee of his responsibility.
The more investors have invested in the account, the higher the manager's credit of trust. This means that investors are confident in the profitability of the PAMM account and trust it with their capital without fear.
Top managers "turn over" millions of dollars. Beginners without investment experience and zero knowledge in the field of currency trading should look at such accounts.
5. Where is the best place to open a PAMM account - an overview of the TOP-5 companies
So, a PAMM account is a form of cooperation between several investors and a manager in order to increase capital. Trading operations are carried out online: investors can visually observe what is happening with their capital.
And although PAMM systems are a relatively new service on the investment market, competition among platforms that provide accounts for trust management is very high.
I offer an overview of the 5 most popular Forex brokers.
is the largest PAMM platform in Russia and the CIS. The company has been operating in the currency trading market since 1998. Today, the total amount of investments invested in trust management is approaching $15 million.
The total profit of investors is more than $3 million. The number of depositors in PAMM accounts is more than 50,000 people. The company publishes a constantly updated rating of managers and provides investors with information support.
ForexTrend– the company considers its mission to be the introduction of the most modern and civilized trading methods to the Forex market. The platform is committed to constantly improving customer service and popularizing new tools.
InstaForex- Another broker with a high reliability indicator. The company was founded in 2007 and constantly occupies the top lines in the ratings of online Forex trading platforms.
For several years in a row, the firm has been awarded the title of "Best Asian Forex Broker". Traders and investors have access to analytical tools, statistics, video tutorials and free consultations.
Alpha Forex– the company initially set itself a long-term goal: to become the best Forex broker in the Eurasian market. The site was the first to work through the professional trading terminal MetaTrader 5.
The company is heading for stability and transparency of work with PAMM accounts. Managers receive remuneration only with a positive financial result.
Forex4 you is an international company with long-term plans. A course on honesty to customers and the competence of employees. The broker is engaged in its own development of trading tools and constantly introduces new technologies into its work. Automatic withdrawal of profits is available for investors.
For clarity, let's combine the companies and their performance indicators in the table:
№ Marketplace Expected rate of return Peculiarities 1 50% The oldest brokerage site in the Russian Federation 2 ForexTrend 45-60% Large selection of aggressive and conservative strategies 3 InstaForex From 30% Minimum deposit - from 1 dollar 4 Alpha Forex 20-80% Investment is available 24/7 5 From 25% Additional responsibility of the manager Additional information about - in a separate publication.
6. How NOT to invest in PAMM accounts - TOP 7 mistakes of a novice investor
Now about how NOT to invest in PAMM accounts. By knowing what mistakes inexperienced investors make, you will reduce risks and increase profits.
Mistake 1. Inability and misunderstanding of working with risks
Forex trading is a risky activity for capital. Like other financial transactions, speculation in the foreign exchange market involves a certain risk, which cannot be avoided.
Be prepared for the fact that you will have to work in constant tension. Some beginners panic at the first drawdown. To become an investor, you need to have strong nerves and a cool head. If you want peace of mind, put your money in the bank.
Mistake 2. Blindly investing in PAMM accounts of the leaders of the rating
The market situation is characterized by constant changes. The current leaders can fall to the bottom of the rating list at any moment.
Blindly investing in hyped traders is not a guarantee of high profits. Conduct your own analysis and pay attention to the experience of exchange players.
Mistake 3. Entering during a big rise
Currency trading is characterized by cyclicity. A big boom is followed by a recession - these are the laws of the market.
Beginners often invest in a PAMM account when it is at its peak. It is better to “enter” when the account is in a state of drawdown, but an early rise is expected.
Mistake 4. Exit during a recession
The other extreme is exiting during a recession. Such a decision is often made on emotions - the investor experiences panic, fear for the loss of funds and forgets about the original strategy.
Experts advise to remember a simple truth: the Forex market is always alive, not static. Recession precedes rise and vice versa. Wait until returns stabilize before exiting. Don't let emotions get in the way of financial affairs.
Mistake 5. Checking statistics too often
The information universe is infinite. If you check your account status too often, you can become dependent on statistics and earn neurosis or depression.
Traders and trading systems are just tools that will work regardless of your participation. Do not spoil your nerves by trying to change what you cannot influence.
Mistake 6. Expecting a quick return on investment
Investments in PAMM accounts are long-term investments. Do not think that the first deposit will bring you profit the very next day.
Even experienced traders with their strategies take time to realize their potential. We can talk about the first objective results only 3-6 months after opening a personal account.
Mistake 7. Going to extremes
Beginners who have invested in an aggressive PAMM account see a drawdown, panic and transfer the money to another trader with a small but stable income. After a couple of months, it seems to them that the profit is negligible, and they again transfer capital to the speculator with a risky strategy.
Such jumps can go on indefinitely without giving tangible results. Conclusion - stick to the middle.
7. Conclusion
Let's sum it up, friends. PAMM accounts are a promising and noteworthy investment tool that can be used by novice investors who do not have any experience in the foreign exchange market.
Modern trading platforms provide quite an acceptable level of safety for investors, but the profitability and degree of risk largely depend on the actions of the investor himself.
The HeatherBober project team wishes readers success in mastering new financial opportunities! We are waiting for the evaluation of the article, comments and thoughts on the topic of publication. See you soon!
InstaForex clients have an excellent opportunity to participate in the PAMM account system.
PAMM-system is a service for the collective investment of funds in the Forex currency market.
PAMM-system (Percentage Allocation Management Module) is a set of special trading accounts for working on Forex, with the help of which they manage their capital and the total capital (of other traders). The essence of the PAMM system is the ability of a trader to accept investments from other traders or invest his own funds in someone else's trading account by owning any share in it.
Thus, investors use the capabilities of the PAMM system in order to profit from transactions made by managing traders.
All investments and transfers within the framework of the PAMM system are automatically controlled by InstaForex, which guarantees security, transparency and accounting for all transactions within the system to all its participants.
At its core, a PAMM account is one of the forms of trust management of the collective funds of a number of traders, where the broker performs share accounting, provides the same rights to all traders and allows you to allocate at any time that part of the total funds that belongs to each of them individually. At the end of the trading period, the profit received on the PAMM account is proportionally distributed among the participants (investors) of the PAMM account, and the managing trader receives the remuneration stipulated in the contract for his activity, which can be expressed as a percentage of the total profit for the reporting trading period.
PAMM accounts are divided into 2 types: investor PAMM account and manager trader PAMM account. Investor's PAMM account can only transfer funds to PAMM traders' accounts. The manager trader's PAMM account can only accept investments from the accounts of PAMM investors. Each InstaForex client can have an unlimited number of trading accounts that can participate in the PAMM system as PAMM trader and PAMM investor accounts.
An important feature of the PAMM system is the ability for PAMM investors to diversify risks by investing in PAMM accounts of various managing traders.
For PAMM traders, InstaForex has provided in the system unique innovation: accepting investments from different investors on one PAMM account, which at the moment is not offered by any brokerage company in the world. A unique technology for calculating funds - the development of the company's management and the fruit of the annual work of programmers.
The PAMM-account system from InstaForex is by far the best in its capabilities for managing traders and investors, but work on improving the functionality of the PAMM-account system does not stop even for a second, which allows us to guarantee the highest standards of service and reliability for InstaForex clients.