Salary  For investors in trust management money is the most important thing - choose the right PAMM account

for investment. Everyone always says that you need to invest your money wisely, but what does that mean? The only thing an investor can and should do is choose a manager, and choose well, because your income will depend on him.

Personally, I chose my managers based on certain principles. So, the highest percentage of successful operations and a certain stability of indicators were the main things I paid attention to. Let's go in order.

How to choose the right PAMM account? The first thing I will say is where you can invest your money. The first thing everyone sees is the column with profitability, and of course there are huge percentages there: 500-1000%. The fact is that some managers actually achieve this, with a small initial capital, but just as quickly they lose it, some achieved this in a couple of days or a week, then they lose half and some stop trading, some then trade very slowly... as a result, they can remain in the first places of the ranking for a long time, because in the profitability column they will have 500%, for example. Let's get to the core of being an investor. What is most important to us?

This is the safety of our money + stable income. So we look at the profitability graph, but we are looking for average figures of 200% per annum with a 50/50 offer - for the investor it will be 100% per annum.

Safety of money

There are several parameters that will guarantee the safety of our money. Among them are more or less important, they simply together give us confidence in this. — PAMM account age

. If it exists successfully for a year, then this is a good indicator for us. The manager has been working with a profit for a whole year already; during the year he had many difficulties, but he always managed to cope, which means that if they appear again, then we can reasonably assume that he will cope with them again. . If it is very small, then this encourages investors to doubt the manager. Why did a successful trader save so little? Why doesn’t a successful trader show that he trusts and risks not only the investor’s money, without losing anything? A large CG shows that the manager has both personal interest and responsibility. But sometimes, in rare cases, the manager has his own reasons for this; he can justify the small capital with some of his own arguments.

— Amount under management . There may be both CG and investor money. If this amount is more than $50,000, and I look even at larger ones, from 100,000, then it means that as a rule, many investors invested in this PAMM, and many trusted it for various reasons. In this case, these reasons can be looked for and in most cases they will be obvious, because no one invests money just like that.

-Relative drawdown . This is a relative loss maximum amount which the manager could lose at some point, this loss is calculated as a % of the amount. For example, it is 35%, which means that the manager at some point lost 35%. But this could also be a potential % since this loss might not have been recorded, i.e. maximum loss during an open trade. Those. the manager did not receive a 35% loss, but only could, since in the open transaction he had -35%, but the market changed and went to +10% and then the manager fixed the transaction, closing it with +10%. Each PAMM account has one, since it is not possible to trade all transactions only in +. Perhaps one was at – 35%, and the other 10 were at + 35%. This % only shows how much the manager could have made a mistake at some point. If this number is close to 90%, then it’s worth thinking about it and taking a closer look at the income statistics. But in general, up to 40-50% is the norm or acceptable value.

You can look and study this or that manager.

Offer details

In essence, an offer is the manager’s conditions for accepting investments.

There are explanations in the offer, but I will make a few comments:

Trading period 4 weeks– This means that you will be able to withdraw money once every 4 weeks. In order to do so, you need to make a withdrawal request, in which you indicate a certain withdrawal amount, or withdrawal of only profit or the entire deposit and profit. Most PAMM accounts have a trading period of 1-2 weeks.

Reward 50%- this means that the manager will receive half of the profit earned as payment for the capital management service provided to him. For example, in January he earned 31.72% - therefore, you get 15.86% (exactly half) of the amount of your investment.

Liability: 0%— this line means that you share losses equally with the trader if he goes into the red.

Min. amount and balance: 500.00 USD– the minimum amount for investment is indicated here.

Very clearly, without graphs, the column shows the % of profitability by month. For example, a PAMM account has been in existence for 7 months, and the following data is in the column:

PAMM 1 brings very good income in some months, but there are also losses. In PAMM 2 the income is approximately the same every month. Who is more likely to make a loss? The answer is obvious. Since we are looking for stable income and reliability, we will choose PAMM 2. In investing, the main thing is not the lottery and thoughts of “what if you get lucky,” but a planned and reasonable investment of money in order to make a profit.

You can also monitor this indicator on Alpari PAMM accounts where you can invest money. There you can see this clearly in the profitability graphs. For example, here are the following graphs:

In general, there is growth, but there are also declines that can once exceed growth, since declines are as stable as growth, although to a slightly lesser extent.

Ups and downs as well. Risk, not reliability, not stability.

Ideal profitability chart

These are all the main points you should pay attention to when investing. Everything is quite simple and does not require much time, since brokers provide all these data in the most convenient way for us. Now a question for you how to choose a PAMM account Almost solved, all that remains is to move on to practice.

Good afternoon friends! In this article, I decided to tell you how to choose the right PAMM account for further investment. I briefly touched on this topic in the first one, in which I described the parameters by which accounts should be found. But it was a bare theory, without examples and concrete actions. Well, let's fix it.

Many novice investors make 2 main mistakes when choosing a PAMM account (I confess I was one of them).

1. Having wandered through sites on this topic (about investing), you will notice that each one has a list of recommended accounts, which, according to the authors, are simply optimal for investing. And if you haven’t invested in them yet, then you’re just stupid fools. Having collected information about the most frequently encountered traders, you invest money in them and wait for profits.

What need to know

Firstly, it is profitable for bloggers to promote certain traders, so they get a pretty penny for the funds raised. In the future, it does not matter whether the trader makes a profit or not. The link to his account is still on the site and gullible people invest and invest.

Secondly. you need to know your investment horizon, i.e. for how long are you willing to invest money? It may turn out that the account goes into a deep drawdown (by 40-50 percent). and you need to withdraw the money tomorrow. Of course, it will turn out to be a plus, but after a certain time. It could be a week, or it could be several months. As a result, you did not earn, but only lost.

Third, which accounts to invest in and what level of risk you are willing to take. Super profitable, but also a high probability of losing all your money. Or moderate profits and the same risks.

At the beginning of my investment activities, I also invested part of the funds in such “recommended” accounts. The rest I chose myself.

Result: in 3 months the profitability of the second ones exceeded the first ones by almost 3 times.

Accounts may get into the TOP by chance (showed good profitability for last month, two or a serious investor has invested in you, etc.) and you are practically at the top of the rating.

Of course, there are good managers who show stable profitability. And they are constantly at the top of the rankings. But as a rule, if you take the total profitability of the aggregate of all top accounts (on the date of your investment) after a few months, the profitability is not great, because some will drag your score down, showing either small or even negative returns.

Well enough chatting, let's get to the main point.

Selecting PAMM accounts

I mainly invest in conservative accounts, according to the principle put it in and forget it.

More aggressive ones require constant monitoring and, accordingly, more time. This is unacceptable for me, due to my busy schedule.

The process of selecting the necessary accounts takes me about 30 minutes. Review them once every 2-3 months and you will be happy.

Let's look at the choice of Pamms using the example of my beloved Alpari.

We see a list of all PAMM accounts in the rating. On this moment there are 236 of them.

Now we configure the output of the information we need:

1. account age

2. trading aggressiveness

3. Profitability (for a year, for 6 months, for 3 months)

4. Maximum drawdown (over the last six months)

It turns out something like this:

Now we set the conditions by which the accounts we need will be filtered.

1. We select accounts opened more than a year ago. It is during this time that the manager’s strategy goes through all the tests and difficult periods. For more short term, even with a positive profitability, there is a possibility that the manager has not yet gotten into serious trouble and his system has not yet been fully honed.

2.Aggressiveness of trade - no more than 4 lightning bolts. Again - according to the principle, less aggressiveness, less risk of losses for our capital, we sleep better and do not turn gray prematurely.

3. Profitability. We have three columns of profitability at once (year, six months, 3 months). I need a minimum annual return of at least 60%. To exclude the manager’s banal luck and check the stability of profitability, we set the yield for 6 and 3 months, respectively, at 30% and 10%. Only accounts that demonstrate constant profitability over any period of time will fall under this criterion.

4. The maximum drawdown over the last six months is no more than 30%. Why in six months and not in a year? At the beginning, a trader can feel for his trading style, his trading system, and experiment. Then everything returns to normal and some kind of stability appears in trading, and from this you can already judge possible risks and profitability.

As you can see, out of the original 236 accounts presented in the rating, only 11 remain. From them you can form your investment portfolio.

Now we need to analyze each account. Profitability schedule, manager's capital and the amount of funds raised, offer (manager's remuneration), investment conditions (minimum amount), number of merged accounts.

Based on your preferences, choose the ones you need. As you can see, choosing the right PAMM account for investment is no more difficult than boiling an egg.

Happy investing!

Agree that Hollywood films about Wall Street have formed a special image of a trader in our brains. This is a successful and wealthy man in a neat suit, who drives an expensive car, doesn’t lift anything heavier than a computer mouse, and makes money out of thin air.

In order to try your hand at playing on the stock or currency exchange, you do not need any special education, permission or license. Now anyone can start making transactions on the stock exchange using the Internet, taking the first step towards this much-loved image of a successful trader.

But reality, as always, is cruel. And it turns out that in order to make a profit from trading on the stock exchange, you will have to learn, fail, work hard and waste your nerves. Few people manage to go through this entire difficult path to the end.

But you can make money out of thin air on the stock exchange without going through all the hardships of a professional trader. All you need is to find a successful player and invite him to play on the stock exchange with your money, and divide the winnings in half.

In order to make money from foreign exchange market Forex, investing in successful traders, there are PAMM accounts.

How to invest in PAMM accounts?

A PAMM account is a managed account in the Forex market. Investors deposit money into this account, and the trader plays with this money. Profit is distributed among investors depending on the investment, and the trader receives a reward in the form of a percentage of the profit (most often the reward is 40% or more)

That is, any trader can create a PAMM account and start attracting investors. But why does he need this?

Suppose there is a trader who successfully trades on the stock exchange and, having invested 100,000 rubles, he has an average of 15% income per month. This means that his profit is 15,000 rubles.

To increase profits, he can open a PAMM account and start attracting money from investors. For example, Investor 1 invested 50,000 rubles, Investor 2 invested 20,000 and Investor 3 invested 5,000 rubles.

Now the account has 75,000 rubles for investors and 100,000 rubles for the trader. With a 15% return per month, the trader will receive 15,000 from playing with his own money and also a reward from investors.

On average, a trader receives 50%, which means that he earned with investment money 11,250 and will receive 50% of this amount, that is, 5,625 rubles. His total income will be 15,000 + 5,625 = 20,625.

There are traders who have more than half a million dollars in their PAMM accounts. They receive huge rewards from their activities.

The benefit to investors is also obvious and consists in receiving passive income. Successful PAMM accounts bring 100% per annum.

PAMM account operation scheme.

The manager opens a PAMM account and starts trading with his own money. If investors are satisfied with the trading result, then they decide to invest in this account.

Investors invested 40% of the total amount in the account.

In case of successful trading, the profit is distributed between the trader and investors in accordance with the initial investment.

Investors receive a profit proportional to their initial investment.

Investors pay part of the profit to the trader as a reward for successful trading.

In this case, the trader is paid a reward of 20% of the profit.

Pros and cons of investing in PAMM accounts.

Pros:

• Small barrier to entry. It may seem that only large sums can be invested in PAMM accounts. But, in fact, the minimum investment starts from $10.
• No need to be a professional trader. You don't need to study stock trading for years to make money on the stock market. You only need minimal knowledge to choose a reliable manager and start making a profit.
• Fraud is excluded. A trader cannot steal your money, he simply does not have access to it.
• Withdrawal of money at any time. After investing, your money is still yours. You can take your money back any time you want.
• Ability to follow the trader. You can monitor the trader’s game from your personal account, analyzing his work.
• Interested trader. Since the manager invests his money in a PAMM account, he risks not only his reputation, but also real money. I don’t even know what could interest him more in success.
• Flexible risk and profitability settings. You can select different PAMM accounts for investment with different returns and different degrees of risk, distributing funds between them in any shares.

Minuses:

The only downside here is the risk. After all, people will manage your money, and they can make mistakes. Because of such mistakes, you can not only make less profit than you expected, but even go into negative territory, that is, make a loss.

Indeed, the profit from this type of investment behaves unpredictably. In some months you can earn a good income, in some months your profit may be around zero, and some months may be completely unprofitable.

The main rule of investing in PAMM accounts.

The main rule is risk diversification. Moreover, you need to start applying the principle of diversification even before you decide to invest in PAMM accounts.

Diversification at the investment portfolio level.

The fact is that advertising of this type of investment and successful cases with high incomes can mislead a person. And behind all the beauty the pictures are completely hidden real risks. If the investor does not provide for them, he may lose money.

Diversification at the level of investment in PAMM accounts.

To obtain maximum profits and minimize risks, it is recommended to trust your funds to different traders. Moreover, the more diverse the strategies of these players are, the better.

Many companies, such as Alpari, can offer you portfolios formed by PAMM, which should reduce your risks or increase profitability. We will talk more about PAMM accounts in the corresponding paragraph below in the article.

With this type of investment, diversification by currency and markets is also used.

In order to select the most diverse PAMM accounts for your portfolio, you need to know what types of strategies traders use and what problems they will help the investor solve.

Types of traders' strategies.

In total, there are 3 types of strategies: aggressive, moderate and conservative.

But in order to describe these strategies, you need to introduce several concepts:

• Drawdown is a situation where the trader and investors suffer losses. Drawdown is measured as a percentage of the total amount of money in the account.
– this is the percentage of funds at risk relative to all money in the account.

Now let's get back to the strategies:

Aggressive score. This is the riskiest, but also the most profitable strategy.

• Profitability: more than 10% per month or more than 120% per year.
• Maximum drawdown: more than 50%.

Moderate score. Average risks and average returns.

• Profitability: from 5% to 10% per month or from 60% to 120% per year.
• Maximum drawdown: from 30% to 50%.

Conservative account. Low risks and low returns.

• Profitability: up to 5% per month or up to 60% per year.
• Maximum drawdown: up to 30%.

You can see these parameters characterizing accounts in the PAMM indicators of the account in which you plan to invest.

PAMM account indicators at Alpari.

The degree of aggressiveness of a PAMM account at Alpari.

You need this information to assess your risks. The more aggressive the account, the higher the potential profitability, but also the higher the risks. The more conservative the account, the lower the profitability and the lower the risks.

Now you know that you need to invest in different accounts according to the degree of aggressiveness. But how to choose PAMM accounts that will bring you profit and not loss?

1. Trader experience.

During this time, the trader must encounter at least one drawdown. This is necessary in order to understand how he copes with difficulties. After all, it often happens that managers drain all their funds at the first drawdown.

Look for other accounts of this manager. If they are still working, then analyze them and see what the profitability is. If the account is completely drained, then look at what caused the failure.

2. Drawdowns.

Pay attention to drawdowns when working as a trader. How much risk are you willing to take? Some investors withdraw their deposit when there is a drawdown of 20%. And someone trusts the trader and easily tolerates drawdowns of 50% or lower.

Therefore, choose accounts with drawdowns no greater than you can afford.

3. Trader's profitability.

Pay attention to the annual profitability and profitability for the entire life of the PAMM account. Also see how it changed throughout the entire trading period.

4. Manager's capital.

The more own money the trader participates in trading, the more interested he is in success. Therefore, it is recommended to invest in PAMM accounts where the manager’s capital is at least $1,000.

5. Money under management.

A large amount of money under management indicates that this trader is trusted. And people who invest large sums in PAMM accounts are far from fools. If these people trust this manager, then he has something to trust.

This begs the conclusion: what more money in management, the better.

6. Ratings.

Almost every brokerage platform has a PAMM account rating. They are usually sorted from best to worst. Don't forget to use this tool. You can look for good accounts in the top twenty of this list.

PAMM portfolios.

A PAMM portfolio is a set of PAMM accounts that implements the principle of diversification and is designed to reduce risks and increase investment profits. In addition, when using portfolios, the entry barrier is lower.

You can choose a portfolio yourself, or use already compiled portfolio managers.

On one's own.

Most brokerage platforms have such a function as a PAMM account constructor. You can select accounts yourself and include them in your portfolio.

After this, you will be able to distribute the funds as a percentage between the selected accounts. For example, distribute the majority of the money among traders using a moderate strategy, and entrust a smaller portion to more aggressive managers.

Ready-made portfolios.

A portfolio manager can create his portfolio from PAMM accounts that he considers the most reliable. That is, he will do the work of selecting accounts for you. The manager must also invest his money in the created portfolio, which will force him to take the selection of PAMM accounts seriously.

After creating a portfolio, any investor can invest money in it, trusting the professionalism of the manager. For each attracted investor, the manager will receive a reward.

Risks of PAMM investing.

With this type of investment, there are 2 types of risks: trading and non-trading.

Non-trading.

The non-trading risk is that you could lose money due to fraudulent activities or closure of the brokerage site.

With PAMM investing, non-trading risk is minimal.

• The trader himself will not be able to steal your money.
• If you choose reliable broker, then the likelihood of fraudulent activity or the risk of ruin is minimal.

Sometimes you can hear the opinion of conspiracy lovers that traders conspire with brokers and steal investors' money. That is, the statistics are falsified and everything looks as if the trader is losing money, but in reality there is no trading, and the money is embezzled.

But the likelihood of such conspiracies is unlikely, so you should not take them into account.

Trade.

We have already talked about trading risk above. This is the probability that instead of a profit you will receive a loss. You already know how to reduce this risk by taking a professional approach to choosing PAMM accounts and competently creating PAMM portfolios.

Below we will talk about how to reduce trading risk after the money is invested.

PAMM investment tactics.

Loss limitation mechanisms.

Many brokerage platforms have the ability to automatically withdraw money from a PAMM account if a trader begins to suffer losses. Withdrawals are usually carried out once a day.

This is very convenient because you don’t need to go into Personal Area several times a day to check. You will be able to fix the level of risk and not waste your nerves, because now the trader will not lose all your money while you are sleeping.

Redistribution of funds between accounts (portfolio rebalancing).

This tactic is to redistribute your funds between PAMM accounts after each certain period (for example, 1 month) so that they are again in the starting ratio.

For example, you invested in 2 accounts: you invested $1,000 in Account-1, and $500 in Account-2. This means the ratio is 2:1. After a certain period, Account-1 grew to $1,500, and Account-2 to $1,000. Now you need to redistribute the funds again in a 2:1 ratio. Thus, now Account-1 will have $1670, and Account-2 will have $830.

The point of this tactic is that over time, more and more funds accumulate in aggressive accounts. But, since aggressive accounts are riskier, your risks increase with more money on them. Therefore, you need to gradually redistribute profits from aggressive accounts to moderate or conservative ones.

Investment horizon.

This tactic also involves redistributing money between accounts to reduce risk - from aggressive to conservative. Only this will not be a redistribution of profit, but of the entire amount. And it will depend on time.

That is, you invest short-term in aggressive PAMM accounts, for example, for 1-3 months. After this period ends, you transfer all the money from these accounts to less risky conservative ones.

The more aggressive the account, the shorter the investment period should be, because the risks are higher.

General cleaning of the briefcase.

You must remember to get rid of unprofitable PAMM accounts. If you have an account in your portfolio that has been losing money for several months, you should consider removing it from your portfolio.

You can also add new accounts to your portfolio that you consider promising.

Reviews, bitter and sweet experience of investing in PAMM accounts.

A large number of investors suffer losses due to a frivolous approach to the selection of accounts. And some even lose all their money by trusting only one trader.

In negative reviews, people criticize the Forex market itself, traders, and convince everyone that the manager is colluding with the broker, but in fact, no one is to blame for the loss except the investor.

Conclusion.

Although PAMM investing seems simple, in reality it is not so. If you decide to select traders at random from the leaders in the rating, then such a strategy will be very risky.

You need to understand that professional traders consistently bring profits with minimal risks, while amateurs lose money or mark time. The investor's task is to learn to distinguish professionals from amateurs.

For beginners, a strategy in which the portfolio is filled with a large number of different accounts. This will help avoid high risks.

But with the growing experience and professionalism of a PAMM investor, in most cases he begins to reduce the number of accounts in his portfolio, taking a more serious approach to their analysis.

Most brokerage platforms allow you to test accounts using a demo account, so you don’t even need to invest money to get started.

REGISTER WITH ALPARI AND OPEN A DEMO ACCOUNT

In this article we will talk about how to choose a PAMM account. There are a lot of incomprehensible parameters there; it’s difficult for a person far from trading to understand all of this.

I will tell you how to choose a PAMM account using an example, but don’t worry, all brokers have approximately the same interface and set of PAMM characteristics, so you can easily use this knowledge on other sites.

If you work with Alpari, you will like this video:

Let me warn you right away that even following all these recommendations does not guarantee you anything! You can lose money in any case.

If you are a beginner, then start from the beginning with the article.

1. Daily growth

Do not confuse this parameter with simply “growth”, which shows profitability over the entire period of the PAMM account’s existence. Look specifically at the daily value, since a trader can have a month in minus or near zero, and then his fortune will be +80%. In this case, the “growth” value will also be in this range, but this information will be of no use to us.

2. Number of days from opening (lifetime of the PAMM account)

It's not that simple. The fact is that if the account is young, we do not know what to expect from it. Will go from up or down. But as experience shows, the account brings the main profit just at the beginning of its existence. And I wouldn’t say that age gives any guarantees; I saw how both five-year and three-year accounts merged. Therefore, take from six months and above. On the contrary, I don’t recommend taking “old” five-year-olds, there is a high probability that they will go bankrupt.

3. Results of each month/year

Don't be lazy, look at what happened before. How did the trader end each month and year of his work? Make sure the results are not too different. If he finished one month with a small loss, then with small profit, then with a large loss, then with a large profit - this is an unstable manager, you should not work with him.

4. Maximum drawdown

The less risky a trader trades, the better it is for us investors. I am a supporter of non-aggressive trading. It’s better to receive less, but consistently, than a lot, but with a much higher probability of losing everything. If the drawdown is around 20%, this is a normal value. If it’s more, it’s already dangerous.

In principle, it doesn’t matter here, just note that some brokers have crypto accounts. I don’t know how you personally feel about crypto, but I am writing this article at a time when nothing is happening at all in the crypto market. It must be cool to trade on crypto accounts when the market is growing, as it was in 2017.

6. Appearance of the growth graph

He must grow, that's clear. But it matters how it grows. The chart should not have sharp drawdowns or sharp rises. Everything should be smooth. Here is an example of such a graph:

Pay attention to the yellow line. Here's a drawdown, then a slight increase, then again a slight increase, then another, and another, then another drawdown and all over again.

Here is an example of a bad graph, as paradoxical as it may seem:

Everything is too good for him, only continuous growth, and this doesn’t happen even for best traders, there should always be drawdowns. Most likely it's automatic trading or something like that. It is better to choose a PAMM account with a “not ideal” chart. I'm certainly no authority, but I don't trust such accounts.

Usually it ends like this:

7. Minimum amount

There are two points here. Firstly, if you don’t have enough money in your account, then there is no point in even considering managers whose minimum wage is higher than your amount. Secondly, I still see a connection between reliability and the minimum amount. More or less successfully operating PAMMs are not interested in “kopecks”; their entrance ticket will cost at least $1000.

8. Number of users

The factor is dubious, but still I pay attention to it. Accounts without subscribers or with a small number of them raise suspicions. In addition, if you don’t want to bother at all with the question of how to choose a PAMM account, just take the one with the most investors, i.e. the most popular.

9. Manager's capital

The more deposit a trader has in his account, the better. Agree, it’s somehow strange to trust 1000 bucks to a dude who has own funds only 200$.

10. Account currency

As I already wrote in the article, most accounts are in dollars, which is an advantage, since the ruble can jump at any time, and you can earn money simply by converting your rubles into dollars. But, if you want it in rubles, it is also available in rubles.

Choose more than 0.02 - 0.04, because if less, the profitability is too low. I won’t tell you in detail what it is, I’ll just say that this coefficient shows the return on investment, and the higher it is, the more profitable it is.

12. Loading deposit

Just because you give the manager $5,000 does not mean that he will use all of the $5,000. Can be used, but shouldn't. And so I recommend taking those who do not load your deposit by more than 20-30%. Since it is clear that if a trader almost always uses all available investor funds, this means that he constantly risks all the money, and this is already high-risk trading, I don’t like it.

Some brokers offer account discussions where everyone can have their say. I advise you to take a look and read. It would be great if the manager answers all messages.

14. Investor comments on third-party sites

It will also be useful to read about the account on third-party sites or forums. Just Google its name and see what comes up. The largest resource where PAMMs are discussed is the MMGP forum, here is the corresponding thread https://mmgp.ru/forumdisplay.php?f=385. There you will learn exactly how to choose a Pamm account.

Every investor, when first meeting with PAMM accounts, has many questions related to their choice. How to choose a PAMM account? Are there reliable PAMM accounts? How to invest in PAMM correctly?

In this article we will look at several rules that answer the question of how to choose the right PAMM account and help you find truly reliable PAMM accounts.

We have formulated several tips, following which will help you avoid making serious mistakes at the very beginning and not being disappointed in PAMM accounts even before you make a profit.

We will analyze based on Alpari PAMM accounts, but these principles apply to PAMMs of any broker.

To assess the profitability and risks of a PAMM account, first of all, it is necessary to analyze the statistical indicators of its trading history. Most of the data necessary for analysis can be obtained from the profitability graph, deposit loading and statistical indicators. This data is published by the broker, where the manager maintains his PAMM.

The indicators of average monthly, quarterly, semi-annual and annual profitability will help to assess profitability, and the more averaging periods, the more reliable the assessment.

It is important to evaluate profitability taking into account the payment of remuneration to the manager. If, for example, the manager takes 30% of the profit from trading, then your estimate will be reduced by almost half. In our rating, profitability is calculated taking into account the payment of the manager’s commission.

The indicators of maximum drawdown, aggressiveness of trading and maximum daily loss allow you to assess risks - using them you can calculate the amount of loss that can be received on a PAMM account.

The maximum drawdown shows how much loss has already taken place in history. The same drawdown, and even more, may happen again in the future. Pawn it as a possible loss.

Standard deviation indicates the risk of deviating from the average return. If, for example, the standard deviation is 10%, then a drawdown of 10% at the end of the month and 35% at the end of the year are considered normal.

Aggressiveness and maximum daily loss allow you to estimate possible losses in the event of a series of unsuccessful trades by a trader. For example, a worst day of 2% suggests that a drawdown of 35% could be achieved within a month of daily unsuccessful trading with an average loss. This is a fairly reliable PAMM account. A maximum daily loss of 15% means that the same drawdown of 35% will be exceeded in the event of 3 worst days in a row. This is a completely possible event that clearly shows the level of possible risks.

Briefly, what to look for

1. PAMM account age: reliability of indicators, at least 6 months, better than a year.
2. Average month: expected return.
3. Maximum drawdown: possible loss.
4. Standard Deviation: The risk of deviating from expectations.

Please note that risks tend to grow over time; when choosing a PAMM account, add a growth margin of 5–10% to the resulting estimate, and the younger the account, the more risks can grow.

Please also note that for PAMM accounts, the reliability of statistics directly depends on the volume of data analyzed. If the account is 3 months old, and only 20 of them were traded, then these statistics cannot be trusted. This data is too small to draw conclusions; future indicators are likely to differ from current ones. PAMM account indicators are more reliable if they are based on more than 300 observations (non-zero trading days). Age also reflects a PAMM manager's ability to adapt to changing market conditions.

2. Analyze the trading system

Selecting PAMM accounts based solely on history is not enough and even dangerous. The future most often does not repeat the past schedule. If PAMM had a good first year, the second year will likely be worse. Therefore, before choosing a PAMM account, be sure to study its trading system.

A PAMM account may have a history of almost straight growing chart with small drawdowns or no drawdowns at all. In this case, the risks may be so high that the account will be lost in one day. It will cost you the entire amount invested.

In this case, martingale was used on the PAMM account and stop losses were not used. These risks are poorly visible on the chart and are built into the manager’s trading system itself. Without studying the parameters trading system PAMM accounts, you cannot choose the right PAMM account.

How to learn a trading system?

Trading parameters can be seen from the leverage chart (deposit loading) and from intraday fluctuations in the profitability chart. In addition, the manager can describe these parameters in the investment declaration of his PAMM account.

Lever used

You need to look at the leverage or deposit loading chart. In general, the higher the leverage, the higher the risk. The deposit load corresponds to the trading leverage used (for example, a 10% load corresponds to a 1:10 leverage). When trading a currency with a leverage of 1:10, the account profitability will change by 10% when the market moves by 1%. Daily currency movements can reach 2% on news releases.

A leverage of up to 1:50 is considered relatively safe. Conservative level is 1:25.

In addition, the manager can declare the maximum leverage in the declaration and set an automatic limit in the PAMM account settings.

Loss limitation

Does the manager limit the loss that can be received in one trade, or waits out the loss until the last minute. The absence of restrictions (stop losses) always leads to drainage and loss of the invested amount.

You can determine the presence of stop losses by the worst day (maximum daily loss) in the history of the PAMM account. If the worst day is more than 30%, most likely there are no stop losses, set the risk to 100%.

The worst day also helps to assess the possible drawdown on the account. Multiply this value by 3 - a loss at this level can be considered normal for a trading system.

The presence of stop losses and the value of the maximum risk per transaction can also be indicated by the manager in his declaration. By raising the risk per trade to the power of 5 unsuccessful trades, you can estimate the size of the possible drawdown under unfavorable market conditions. For example, if the risk per trade is limited to 10%, then 5 losing trades in a row will give a drawdown of about 40% (0.9^5 - 1).

Martingale

Hidden risks also include dangerous trading methods. The most common are martingale and other averaging methods. In systems using these methods, the transaction volume increases when there is a loss in the hope of winning back when the price moves in the right direction. Such a system significantly increases risks - if the price does not go in the right direction for a long time, there is a high risk of losing all capital.

The manager can clearly declare the use of these methods and warn investors about the increased risks. Their use can also be identified by the sharply growing loading of the deposit in the event of losses.

Summary

Analysis of a trading system allows you to estimate the size of a possible loss, even if it has not yet occurred in history. This greatly increases your chances of making rather than losing money. This can also be helped by the manager honestly stating in the declaration how he trades and what the possible loss is.

We analyze trading parameters when choosing PAMM accounts for our rating. Only accounts with moderate leverage, loss limitation and without martingale are included there.

3. Consider the ratio of profitability and risk

Any risk must be justified. In the case of an investment, it must be justified by the expected return. No matter what risk you take, the expected return over the investment period should exceed the risks by 2-3 times. If a drawdown of 50% is possible on an account, then its profitability potential should not be less than 100–150%. If you risk losing your entire deposit, then the justification will be the chance to increase it by 2-3 times.

This proportion is also true in the opposite direction - if you allow a drawdown of only 10% and expect a return of 100%, then most likely you underestimated the risks.

To assess the relationship between profitability and risk, the ratio Average Return / Max is usually used. drawdown (Kalmar coefficient) or Total return / Max. drawdown (recovery factor).

4. Plan your exit conditions

Before choosing a PAMM account and investing, you need to determine the exit conditions, i.e. indicate events upon the occurrence of which you will withdraw your funds from your account. In this case, you won't have to worry unnecessarily. Such events typically include anything that disrupts the original investment plan.

Exceeding the maximum drawdown
In essence, this is limiting losses on a PAMM account at the level of acceptable risk. The size of the limit is determined based on the estimate of the maximum drawdown that you made in advance. The loss limitation is usually set several percent lower than the risk assessment.

Exceeding the maximum drawdown period
Another condition for exit may be exceeding the maximum drawdown period. In this case, funds are withdrawn from the account if it does not update the maximum yield for longer than ever before. This may be a sign that the trading system has lost its effectiveness in a changed market.

Change or violation of the declaration
The reason for exit may also be a significant change in the trading system by the manager. If you assessed risks using certain trading parameters, and the manager began trading using a different system, then the new system parameters may disrupt your plans, and it would be wise to close the investment.

5. Build a portfolio

This is the main way to reduce risks and is practically an axiom in investments with high risk. We've already discussed how investing in a portfolio can flatten the yield curve and increase performance stability compared to investing in individual PAMM accounts.

Important rules for constructing a portfolio are diversification and risk distribution.

Diversification

Diversification means including a variety of PAMM accounts in your portfolio. Diversification significantly reduces the risk of an investment portfolio, while most often without reducing profitability. The greatest effect from diversification is achieved by adding PAMM accounts to the portfolio in such a way that the fall in the value of one asset is compensated by the growth of another.

An example of diversification would be the inclusion in a portfolio of accounts of various managers, accounts trading on different currency pairs or on currencies and metals, trading along a trend and in a channel, with different investment currencies, etc.

Do not include multiple accounts from one manager in your portfolio. This is bad diversification. It’s better to choose 2-3 of the most reliable PAMM managers and add one account for each.

For sufficient diversification, 3-5 accounts in a portfolio are enough. The share of conservative accounts, as a rule, should be at least 60-70% of the portfolio, moderate - 20-30% and no more than 5-10% of aggressive accounts.

Risk distribution

Distribute the shares of PAMM accounts in the portfolio so that the risk of each account does not exceed total risk portfolio divided by 2–3. This means that the portfolio must withstand simultaneous maximum drawdowns of two or three accounts, and at the same time the maximum risk for the portfolio should not be exceeded. This is regulated by shares of accounts. If the share of an account in the portfolio is 10%, then if its drawdown is 50%, the portfolio will drop by 5%; if this happens to three accounts at the same time, then the portfolio drawdown will be about 15%.

Optimal distribution, as a rule, is achieved by arranging shares in inverse proportion to the risks, in which case the risks will be distributed evenly.

6. Withdraw profits

Withdrawal of all or part of the profit received is one of the main ways to reduce risks when investing in PAMM accounts. The main goal is to reduce possible losses profits in case of further drawdown, so the main principle is to take profits whenever the probability of further growth decreases.

For example, if you expect to “catch” a short movement on a trend or at the exit from a drawdown, then as you approach the peak of profitability, it is advisable to take profits in parts, since the likelihood of a new drawdown increases. It’s not scary if part of the profit is lost, the main thing is that you are insured against the loss of all income, this is more important.

If you are planning a long-term transaction, for example, on a reliable conservative account based on annual profitability, then the moment of profit withdrawal is no longer so important; withdraw funds at local profitability peaks or simply every month.

7. Invest no more than you are willing to lose

And lastly, do not invest your last money even in reliable PAMM accounts. No matter how attractive the return may seem to you, there is always a risk of losing a large part of your capital. Even if you have planned your investments correctly and limited losses, the drawdown may drag on and a large portion of your deposit will be unavailable for a long time. Invest in PAMM accounts only available funds- an amount by which your income exceeds your expenses, and the loss of which will not critically affect your financial condition.