Investing in PAMM-accounts
This type of investment has appeared recently. Namely, with the already ubiquitous development of a network of broker companies and, in fact, new terms of trade on exchanges, and the foreign exchange market Forex. We all know that you can lose everything in Forex. More precisely my whole deposit. And very quickly. But there the system is binary. Either buying or selling. And accordingly with the same success you can just double your deposit. But if you are not ready to trade on your own, which is very likely, brokerage companies now provide such a service as a PAMM-account. Decoding from English this term has a percentage distribution control. The essence is extremely simple. There is a so-called PAMM-manager who opened this account, trades on it, which is called in the open. That is, you can always see how much of its funds this manager has invested, what indicators of profitability, loss, it demonstrates in its trade, how much time this account exists at all. Determining which manager is closest to you, you through your personal cabinet, opened with this broker, contribute your funds to this account. And, accordingly, the amount of funds on the account is increased by the amount of funds contributed. Further, the manager continues to trade. If it trades in a plus, then, say, in a month you can withdraw your profit, which is calculated as a percentage of the increase to the total account, but this increase is calculated on your contributed funds, taking into account some commission for I / O operations, manager’s fees.
More about PAMM Accounts
To begin with, you need to decide on the choice of the manager and the broker company. To do this, you can simply specify these two terms in the search engine and click on the links to the corresponding pages. Further, it is necessary to carefully analyze the results of the work of these or other managers. Namely:
- Time, duration of the account. Preference should be given to accounts that are stable for more than 6 months, provided that every month there was a profitable trade. If the account is opened recently, then there is a possibility that the managers are very inexperienced.
- Results of trade. Some managers can show the results of trading more than 100 percent for six months. These are very good indicators. But here we must also take into account the degree of risky trade, namely, drawdowns. That is, if the manager allows drawdowns up to 40-50% on open operations, then the risk is extremely high. A small rolling of the market not in the direction of the manager can lead to the closure of the account for the so-called stop-loss and, accordingly, the loss of more than half of the funds on the account, and each of the investors.
- Number of investors. That is, how many people have already entrusted funds to this manager.
- The ratio of the manager’s own funds and the funds of investors. The more investors he manages, the more trust this manager. And if he manages only his own means, but I do not advise investing in this account.
- Manager’s remuneration. A reward is considered normal within 30% of the profit.
- Trading system of the manager. Each manager should be able to clearly describe the conditions of entry / exit from the transaction. If it seems to you that he wrote a complete nonsense in this section and so you can not trade, then do not trust him. And if its trading system and rules of trade are quite reasonable and logical, then it is worth taking a closer look.
Further it is necessary to familiarize thoroughly with the broker, and the conditions on which the PAMM-accounts function. Pay attention to the following points:
- Ability to withdraw your funds at any time. Even with a minus, if the manager began to lose.
- The currency in which transactions are performed. If it’s dollars, then how is the I / O rate calculated. It is possible that the withdrawal rate can be «average» between the refill rate and the current one.
- Time and period of settlements. How often and when you can deduce your profits and thus receive dividends.
- Reliability of the organization — a broker. If this organization exists for a long time, and is already involved in some scandals (dig on the news), then they should not be trusted. The manager can and good, but he too can be deceived by the organization.
The most important risk is the risk of discharge by the manager. A person can trade for a long time in a plus, but it costs him several unprofitable operations, then he, as they say, can go into a spin and close with a loss one operation after another. Moreover, the market is an unpredictable element. Minute fluctuations of 500 points — this is the norm. And if you trade one lot, it can be a loss of $ 500 full.
PAMM accounts are a modern investment tool. They can bring high returns (up to 100% for six months), but they also have a number of risks. Trust. But it is desirable for those managers who you know personally.