Last update:  03/22/2020

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Good afternoon, dear readers of the financial magazine "site"! Studying various ways of investing money in order to generate income, one cannot ignore the PAMM account. It is about them that will be discussed in this article.

From this post you will learn:

• What are PAMM accounts and how does it work;
• How to open your PAMM account and in which companies is it better to do it;
• How to choose the right PAMM account for investment;
• What risks does an investor bear when investing in PAMM accounts.

In addition, at the end of the article you can find answers to questions that most often arise when deciding to invest in PAMM accounts.

The presented publication will be useful not only for those who have decided to use PAMM accounts in their work. It is also useful for those who decide to improve their financial literacy, as well as those interested in various ways of investing, including.

About investing in PAMM accounts, what it is, how to choose and where it is better to open a PAMM account, what reviews can be found about PAMM investments in Forex - read about all this in this issue

Many seek to find a way to earn decent money without having to visit the office. Few people like to give all their strength and skills to someone else's company. That is why, having reached a certain experience and knowledge, people begin to look for those that practically do not depend on the efforts made.

PAMM accounts are a financial instrument with a high degree of reliability and profitability. It is enough to have several such accounts in order to regularly receive a good profit by making minimum effort . However, before taking advantage of this opportunity, it is important to understand what are the features of such a financial instrument, as well as how best to use it.

First, we give a definition that is given in scientific financial works.

So what are PAMM accounts?

PAMM account is a certain mechanism for using a trading account, with the help of which you can transfer funds to a professional manager in trust management for the purpose of carrying out financial transactions on various exchanges.

Abbreviation PAMM (PAMM) derived from the English phrase Percent Allocation Management Module . Literally translated into Russian, it means percentage distribution management module.

Many are frightened by such abstruse definitions. Therefore, it is useful to consider the principle of operation of a PAMM account using an example.

illustrative example

Suppose an investor has a certain amount of free cash, for example, $10,000. He would like to increase them, but he does not have the time, experience and desire. At the same time, he knows that his good friend is involved in trading on. To do this, he uses not only personal funds, but also attracted capital.

The investor decides to transfer his money to the management of the trader for one month, provided that he will deduct a certain percentage of the income earned on them.

Eventually across 30 days the investor will get back the invested funds with dividends (for example, 20 %). That is, in the end he will receive his 10 000 $ + 2 000 $ . At the same time, the manager for successful activities will be rewarded by paying him a commission.

In simplified form, this is what it looks like. operation of PAMM systems. That is, the investor's funds are transferred to an account that belongs to the manager. He implements. At the same time, the number of investors who transferred funds for management to one trader is not limited in any way.

advantage this type of investment is the absolute transparency of all actions carried out by the manager.

When investing in PAMM accounts, all transactions carried out by a trader are tracked in automatic mode. At the same time, the broker who provided the trading platform makes sure that the transactions being made are legal and that the rights of investors are not violated.

PAMM accounts - how it works

2. How a PAMM account works - the principle and scheme of a PAMM account

It turns out that PAMM accounts represent a certain investment service. It allows investors to make a profit without carrying out independent operations in the Forex market. At the same time, the manager receives a certain income for providing investors with services for managing their funds.

Let's take a closer look at how PAMM accounts work.

2.1. The principle of operation of a PAMM account - 4 main stages

There are several main stages in the work of PAMM accounts.

Stage 1. Opening a PAMM account

The manager decides to open a PAMM account. He selects a brokerage company that provides such an opportunity. You can find it in the previous article.

The broker opens a special account for the manager, which is called PAMM. After that, the manager deposits a certain amount of money on it. It represents the capital of the manager.

With these funds in the process of trading, he will risk in the same way as with the money of investors. That is, the manager's capital is a certain insurance against the trader's rash actions.

Stage 2. Offer creation

After the PAMM account is opened and the funds of the manager are deposited to it, he publishes offer. It is an offer to investors to deposit funds to a PAMM account.

The offer must contain the following information:

• the minimum amount of investment in the account;
• within what time it is impossible to withdraw the invested funds;
• the percentage of profit that will be transferred to the manager as a remuneration.

Stage 3. Investment in PAMM accounts

Investors spend analysis existing PAMM accounts. To do this, they use an independent rating.

Having decided on the choice, the investor deposits money on the PAMM account, which seems to him the most successful.

Stage 4. Income generation

The manager, using his own, as well as the funds invested by the investor, trades on the Forex currency market.

At the same time, the loss and profit that are obtained during trading are automatically redistributed between all account participants: managers and investors.

Distribution is carried out in proportion to the shares of each participant.

2.2. Scheme of PAMM account operation (with visual drawings)

First of all, the manager opens a PAMM account. Then he decides on what conditions he would like to cooperate with investors, prepares an offer.

After that, he starts trading using his own funds. Investors, having seen the profit that the trader managed to earn in the process of trading, decide to invest in a PAMM account.

Now the manager carries out trading operations using not only his own funds, but also the money of investors. At the same time, the more profitability he shows, the closer to the top his account will be in the overall rating.

If the manager achieves profit during the trading process, the amount on the PAMM account increases.

At the same time, the profit is distributed among its participants in proportion to the amount of funds invested initially.

Each investor gives a part of the profit received to the manager as a commission.

Thus, the operation of a PAMM account in a simplified form can be shown in a table using specific numbers. This will greatly facilitate understanding.

Account members	Amount of invested funds	share	Profit	Commission (20% of profit)
Manager	300 $	60%	600 $	—
Investor 1	100 $	20%	200$	40 $
Investor 2	60 $	12%	120 $	24 $
Investor 3	40 $	8%	80 $	16 $
Total amounts	500 $	100%	1500 $

PAMM portfolio - what is it and how does it work

3. How the PAMM portfolio works - the principle and scheme of the PAMM portfolio

PAMM portfolio represents several PAMM accounts combined into one. This type of investment helps diversify risks, which the investor bears during the investment.

This becomes possible due to the fact that in portfolio investment, the investor selects multiple PAMM accounts, for which the ratio of profitability and the level of risk, as well as the amount of investments for it, are optimal.

3.1. The principle of operation of PAMM portfolios - 4 consecutive stages

Considering the principle of the PAMM portfolio, it is advisable to consider several successive stages.

Stage 1. Portfolio formation

The manager forms a portfolio, which includes multiple PAMM accounts. After that, he invests his own funds in the resulting portfolio, due to which he will be more prudent.

The manager has the ability to change the composition of the portfolio, including new PAMM accounts and excluding old ones. You can also change the shares of different accounts in the portfolio.

Stage 2. Investments

The investor analyzes the information provided on the broker's website on the performance of various portfolios. Having chosen the one that seems to him the most effective, he invests in a PAMM portfolio.

Stage 3. Trading

On PAMM-accounts, which are part of the portfolio, trading is carried out by opening and closing transactions in the Forex market.

Stage 4. Profit distribution

After a while, a financial result is formed on the PAMM portfolio (profit or loss). It is distributed among the portfolio participants in proportion to their contribution to it.

The manager, in addition to a part of the profit, receives a commission, which is paid to him by investors.

3.2. Scheme of work of PAMM portfolios (with visual drawings)

The functions of the manager at the initial stage include:

• create a PAMM portfolio;
• determine under what conditions investors will be able to participate in it;
• invest your own funds and start trading.

Investors evaluate PAMM portfolios in terms of the profitability that it has shown since its inception, the level of risk, as well as the terms of cooperation. In accordance with these criteria, they choose the portfolio that is optimal from their point of view and invest in it.

All the money that was invested in the portfolio is distributed among the PAMM accounts that the manager has included in its structure. At the same time, the manager can at any time change the composition of the portfolio and the shares of the accounts included in it.

Trading is carried out on PAMM accounts, which are part of the portfolio. In the course of it, both positive and negative results can be added. This inevitably affects the profit or loss that portfolio participants receive.

Investors can monitor the status of the PAMM portfolio at any time from their personal account. You can also apply for deposits and withdrawals there.

The financial result that is formed on the PAMM portfolio is distributed among all its participants. If a profit was made, investors transfer a predetermined part of it to the manager in the form of a commission.

Thus, a PAMM portfolio is a certain set of PAMM accounts. The purpose of its creation is risk diversification, which appear in the process of investing in one PAMM account.

Opening a PAMM account - detailed instructions

4. How to open a PAMM account - a step by step guide for beginner investors

It is also important to discuss how to open a PAMM account for a novice Forex investor. It should be understood that There are three parties involved in the operation of a PAMM account:

1. investor invests in it;
2. manager who trades on the Forex market at the expense of the PAMM account;
3. brokerage company or dealing center.

The success of investments is determined not only by the right choice of a brokerage company, but also by a well-conducted analysis of managers.

We can say that there is a distribution of functions:

• broker ensures that the manager does not disappear with the money entrusted to him, and also ensures that the distribution of profit and loss is adequate;
• manager conducts Forex trading and multiplication of funds invested in the account.

Step 1. Formation of a PAMM portfolio for investment

Any investor should remember that before To start investing in PAMM, you should decide on the structure of investments, as well as decide how much money he is ready to invest. In the language of financial terms, he must draw up an investment portfolio.

Important Rule , compliance with which will reduce the risks of investing, reads: should diversify investment flows.

In other words, the invested funds must be divided among several accounts. This will allow reduce investment risks and save money from loss.

In this regard, an investment portfolio is understood as a certain set of investments, a tool that allows the owner of the funds to maximize the profit received.

It is important to remember that investing all the money in one PAMM account leads to the fact that the risk of losing it increases many times over.

Step 2. Choosing a broker

When choosing a brokerage company, investors most often take into account:

• activity experience;
• reliability;
• how popular it is among other investors.

Absolutely all brokers can be included in the rating, they must meet certain requirements.

When choosing a broker, you should be guided by the following criteria:

• How long has the company been on the market?
• the profitability of the dealing company during the entire period of its activity, as well as in the last months;
• how many clients are registered with the broker;
• what are the conditions for opening accounts;
• how user-friendly the interface is;
• whether the broker has any achievements, including those confirmed by awards.

All of the above criteria are met this brokerage company.

Many believe that when choosing a broker, you can also focus on various reviews . But this is not entirely correct. Do not forget that many negative statements on the forums are not true. Often they are ordered by competitors.

Also, very often reviews are written by those who lost their money due to an incorrectly chosen strategy of behavior in the market, as well as when trading independently. But the loss of money by one of the traders does not mean at all that the broker is to blame, because he not responsible for the mistakes of newcomers.

Step 3. Registration

As soon as the brokerage platform is selected, you can begin to take action. But before you start investing, you need to go through personal account registration. To do this, you will need an email, full name and other data.

In this case, do not use fake data. At any time (especially if you need to withdraw funds), brokers can request confirmation of data by sending scanned versions of documents.

Step 4. Choosing a Manager

The choice of manager is the most important point in opening a PAMM account. On the website of any broker there is traders rating . When choosing, you should pay attention to those managers whose accounts showed the maximum profit over the past six months.

In this case, the following parameters must be compared:

• strategy;
• the number of funds entrusted to the manager;
• the total amount of money in circulation.

Step 5. Opening a PAMM account

It remains to take the last step - directly open a PAMM account. After that, it is important not to forget to transfer money to it.

Thus, it will not be difficult to open a PAMM account using the above instructions. It is important to remember that this method of investment should be used for a sufficiently long period. Therefore, it will not be possible to get a quick profit.

And the last tip - do not be afraid of drawdowns. It is important to understand that it is impossible to do without them if you participate in trading in the foreign exchange market.

Making the right choice of PAMM account for investment

5. How to choose a reliable PAMM account for investment - 8 simple but important rules

For those who decide not only to invest in PAMM accounts, but also to make money on it, it can be difficult to make a choice. A huge number of different accounts and traders can lead to a dead end.

However, if you follow a few simple rules, you can significantly increase the effectiveness of PAMM investments.

Rule 1 When investing in PAMM accounts, you should not chase super profits

If you choose to invest in accounts that once showed a huge income, there is a high risk of stumbling upon such a trader who considers Forex to be a kind of casino.

He conducts reckless trading without a specific plan, risking most of the funds in the account in one transaction. In such accounts, a huge percentage of profit shows only what the risky trader lucky. Wherein there is no guarantee that in the future his luck will continue.

It is best to focus on stable positive results over a long period. They can be much lower. But the risk of such investments is not so high.

Rule 2. Funds intended for investment should be divided among several companies

When investing in PAMM accounts, it is important to clearly understand that the investor becomes a market participant that carries a huge risk. He inevitably faces the possibility of losing the full amount of investments or part of it.

At the same time, every effort should be made to minimize this risk. That is why it is so important to distribute funds among several brokerage companies.

If you invest all your money in only one market participant (broker), in case of its bankruptcy, you can lose all your capital.

At the same time, if the capital is divided among at least four companies, only a quarter of the invested funds will be lost if one of them goes bankrupt. This, of course, is unpleasant, but most of the funds can be saved.

Rule 3. Do not invest in one PAMM account

This rule, like the previous one, is based on the need diversify risks.

To understand the principle of action, it is enough to give a small example:

When investing 1 000 $ in one PAMM account, if it is drained, the investor loses a thousand dollars. At the same time, if he distributes the same amount between five accounts equally, if one of them is drained, he will lose only 200 $ .

Rule 4. Bet on experience!

It is important to understand that you can gain experience in the Forex market only by trading for several years. Only in this case, you can develop the most effective strategy, deal with the nuances of trading, decide how to behave in difficult situations.

You should not invest large amounts even in very successful young accounts. It is best to pay attention to those PAMM accounts that are active 1 -2 of the year.

Rule 5. An important score indicator is stability

When looking for accounts for investment, you should pay attention to those that bring stable profit. Do not forget that the presence of a large profit today does not guarantee that it will be tomorrow.

At the same time, a stable positive result from month to month allows us to judge the quality strategy of the manager. There should not be huge drawdowns on the account.

Rule 6. Remember the psychology of a trader

When investing in PAMM, do not forget that an ordinary person manages the account. Therefore, it is important to take into account some psychological points.

An important rule is not to invest more in the account 5-10 % of the amount that the trader manages at the moment. A sharp increase in the volume of the deposit can play a cruel joke. The trader will be under too much psychological pressure, which he may not be able to withstand. As a result, the risk of draining the deposit increases significantly.

Rule 7. Martingale is fraught with great danger

In the Forex market, a fairly popular strategy called martingale . There are a huge number of its varieties, but the essence of all is the same - after closing a losing trade, a new one is placed in the same direction, but with a doubling of the volume. The experience of a huge number of traders has proven that the martingale strategy is always unprofitable over a sufficiently large time interval.

Investor NOT it is worth investing in a PAMM account, the manager of which is guided by the strategy in the trading process martingale, because this greatly increases the risk of draining the deposit.

Naturally, no trader is aware of what strategy he uses. Therefore, it is important for an investor to know the ways that help calculate the martingale.

Consider the simplest of them:

1. Large brokers in the account information provide information about the leverage used. If there are periods when there is a full load in the trading process, this is one of the signs of the use of the martingale.
2. Opening multiple trades with ever-increasing volume in the same direction on the same currency pair can also be a sign that a trader is using a martingale.
3. Another sign of the application of this strategy is the suspicious stability of profit. Even after a significant drawdown, the account generates income, and usually for the same amount.

Rule 8. For investments, it is best to choose PAMM accounts in which the share of the trader's own capital is quite high

Some investors believe that the proportion of a trader's equity in an account is irrelevant. But this is not entirely true. Anyone who has invested a sufficiently substantial amount of their money will not risk it thoughtlessly.

In addition, there are times when the broker colludes with the trader to drain the deposit. One of the signs that it will happen soon is high profits with a very small share of equity.

Thus, sometimes it is not easy to decide which PAMM account to invest in. However, if you follow simple rules, the probability of choosing the ideal option for investments increases significantly.

6. Where is the best place to open a PAMM account - TOP-5 verified companies + comparison table

From the information presented above, it is clear that PAMM accounts act as a way for the manager to interact with one or more investors, the purpose of which is to make a profit and increase capital. In this case, all operations on the account are carried out in online mode, that is, investors have the opportunity to track in real time how the amount of funds invested by them changes.

Investments in PAMM appeared relatively recently. But they quickly gained immense popularity. That is why competition in the PAMM account market is constantly growing.

To date, a fairly large number of brokers offer this service. That is why reviews of the best of them, presented by professionals, are so useful.

Company number 1. Alpari

Alpari is the largest platform for operations with PAMM accounts in Russia and the CIS countries. The company began to engage in operations in the foreign exchange market in 1998 year.

Today, the amount of funds transferred to trust management through Alpari is almost $15 million. The number of investors who have invested in PAMM accounts with the help of this broker has already exceeded 50,000. Their total profit has exceeded three million dollars.

By choosing Alpari, investors can count on informational support. In addition, they get at their disposal a constantly updated rating of PAMM account managers.

Company number 2. InstaForex

According to most experts, InstaForex broker has a very high level of reliability. The dealing company has been operating on the market since 2007 and consistently occupies the highest positions in the ratings.

InstaForex has repeatedly been awarded the title of the best Asian broker operating in the Forex market.

On this site, traders can get:

• free consultation;
• video tutorials on trading;
• access to a huge database of analytics and statistics.

Company number 3. ForexTrend

ForexTrend company defines its mission as follows: to introduce the newest and most modern, as well as civilized ways of trading on Forex. To this end, the conditions and services provided to customers are continuously improved. In addition, ForexTrend makes every effort to popularize new tools.

In 2013, the company received an award as best PAMM broker, which provides an opportunity to invest in PAMM accounts.

ForexTrend in this area provides investors with the following services:

• investment advice;
• rating of PAMM accounts created on the site;
• continuous monitoring of existing PAMM accounts.

Company number 4. Alfa-Forex (Alfa-Forex)

At the time of its creation, the management of Alfa-Forex set itself a long-term goal: to win the status of the best broker in the Forex market in Eurasia. It was this site that was the first to provide the opportunity to use the terminal for trading MetaTrader 5 .

The main goal of the company in the process of working with PAMM accounts is stability and transparency. Managers on this site receive commissions only if a positive financial result has been achieved.

Company number 5. Forex4you

Forex4you is an international broker with global goals. In his work, he tries to ensure the maximum competence of employees, as well as to be absolutely honest with his clients.

Forex4you independently develops unique trading tools and regularly introduces various latest technologies. Investors who decide to cooperate with this company can withdraw profits automatically.

The table below will help you compare the brokers in the TOP-5 more clearly.

Comparative table of companies with PAMM service or automatic copying of transactions:

No. Broker	Average rate of return in %	Distinctive features
1. Alpari	About 50	One of the very first sites in Russia
2. InstaForex	Above 30	You can invest a very small amount, starting from 1 $
3. ForexTrend	46-59	The investor can choose from a large number of both aggressive (with high risk and return), and conservative (low risk and low profit) strategies
4. Alpha Forex	25-75	You can invest 24/7
5. Forex4you	Above 25	The manager has additional responsibility

7. Reviews and opinions of investors about PAMM accounts

There are a huge number of reviews about PAMM accounts on the Internet. They are very varied. Alone claim that they managed to earn a lot of money on this method of investing. Other scold PAMM accounts, calling them fraud and deception of ordinary people.

It is important to understand that PAMM investments are often scolded by those who did not bother to understand them before investing. Such investors have no idea how the account works.

Moreover, they do not understand how to choose PAMM accounts, as well as what can be expected from such investments.

It is not uncommon for reviews to be simply bought by competitors. Their goal is just to throw mud at other brokerage companies.

Understanding which feedback to listen to, which of them are real, is often difficult. Therefore, many investors doubt whether it is worth investing in PAMM accounts.

In this case, only one piece of advice can be given: it is best to trust not words, but statistics and facts. Only they can reveal the real truth about PAMM investment, showing potential returns and risks.

It is also useful to familiarize yourself with (this is one of the possible options for investing money).

It is important to note that PAMM investment by right is an excellent solution for those who decide to invest in order to create sources of passive income. Perhaps, today PAMM accounts are the most reliable, proven and one of the best options for online investment for any investor. And for both beginners and experienced professionals.

What is a PAMM account?

First of all, let's start with a definition. Yes, the abbreviation PAMM(from English) stands for Interest Allocation Management Module.

On practice PAMM account is one of the types of managed accounts in a dealing center (DC), where investors give their savings, and those who manage these accounts, that is, traders, multiply this amount by trading on the Forex market. Immediately after the income for a certain period is received, all this profit will be divided between the trader and his investors in appropriate proportions.

Basic terms

Forex, that is, Foreign Exchange (Forex)(literally translated as foreign exchange) is an international market where world banks exchange different currencies among themselves.

In a situation with PAMM accounts this is a standard speculative trading in various currencies, carried out through the DC.

Dealing center, i.e. DC is an intermediary organization between a trading trader and the foreign exchange market itself. In our case, we will consider a company

Trader, that is, an account manager is a person who trades currency pairs, providing himself with earnings.

Investor or contributor- a person who transfers his savings under the management of a trader in order to receive passive income.

How a PAMM account works

For a better understanding of what is PAMM account Let's take a look at the next figure.

From this image, it is clearly seen that PAMM account is a single account where the common funds of a certain trader and his depositors are located. Thereafter, the manager dealing center ICE FX begins to make trade operations and conclude various transactions. At the same time, all finances are available to him for trading, but this trader cannot arbitrarily withdraw investors' money. That is, the risk that an unscrupulous trader will fraudulently collect your money and soon disappear with them is completely absent.

So, from this image, you can understand that in total there is an amount of 110,000 rubles on the PAMM account. Where:

• 50,000 belong to the trader (blue color);
• 30,000 is the investment of investor Peter (red);
• 20,000 is the investment of the contributor Maria (green);
• 10,000 - funds from investor Yulia (yellow).

What does investing in PAMM accounts look like?

Let's imagine professional trader, which provides itself through currency trading. Let's say that every month he receives a 20% return on his capital - in our example it is equal to 50,000 rubles. That is, every month he earns 10,000 rubles due to his successful trading. But one day he realizes that these funds are not enough for him, and the trader decides to increase his earnings.

So, he opens an account with a broker. ICEFX, trades and, thanks to the results of its successful trading, attracts investors. After a certain time, he became interested in three of our investors who invested in him. PAMM account- Peter invested his 30,000, Maria invested 20,000, and Yulia - 10,000 rubles. Together with the trader's money, the following amount was formed on the account: 50,000 + 30,000 + 20,000 + 10,000 = 110,000 rubles.

As you can see, everything is quite simple. Then events can unfold in two directions.

1. First scenario.

After a month of successful trading, the trader managed to get a 20% yield, which is now automatically distributed as follows.

• The manager receives his 10,000 rubles (50,000 * 20/100).
• Investor Peter receives 6,000 rubles (30,000 * 20/100).
• Contributor Maria earns her own 4,000 rubles (20% of 20,000).
• Investor Julia receives 2,000 rubles (20% of her 10,000).

But as you understand, investors only chose a suitable account, and that was the end of their work. Further, throughout the month, the trader was already working hard day after day, earning a 20% yield. Naturally, according to the terms of the offer (contract), he must receive a certain remuneration for this. Usually it is 50% (but may be less) of the earned funds of investors. Therefore, all earned funds on the account will be distributed according to the following principle.

• Investor Peter will receive a net income, taking into account the payment of remuneration to the trader in 3,000 rubles (50% of 6,000).
• Contributor Maria will earn 2,000 rubles (50% of 4,000).
• Investor Julia will receive 1000 rubles (50% of her 2000).

The trader himself will eventually receive his 10,000 plus 3,000 + 2,000 + 1,000 (50% of the investors' profit), that is, only 16,000 rubles.

As can be clearly seen from this example, each of the investors gave the trader half of the profit received in accordance with the terms of the offer.

It is important to add that if the manager, instead of receiving profitability, incurs losses, then they will be distributed among investors in the same way, with the only difference that no remuneration will be paid to the manager.

2. Now let's look at the second scenario for the development of events for the PAMM account

For example, one month of trading became unprofitable, and the manager went into a drawdown, that is, a minus in terms of profitability by -10%. This means that the trader and each of the investors lost 10% of their investments. Accordingly, now all losses will be distributed among them all in this way.

• Investor Peter will lose 3,000 rubles (10% of his contribution of 30,000).
• Contributor Maria will suffer a loss of 2,000 rubles (10% of her 20,000).
• Investor Julia will lose 1,000 rubles (10% of 10,000).
• In this case, the trader himself will suffer a loss of 5,000 rubles (10% of his capital of 50,000).

That is, in this case, the trader bears the same losses as all his investors. But among experienced managers on ICE FX, such drawdowns are rare. Basically, each trader receives a profitability of about 4–15% per month of trading, which, you see, is a very good indicator.

As you understand, in order to always be in profit, every investor must learn Choose your managers wisely. But before moving on to recommendations for choosing a PAMM account let's draw conclusions.

1) So, if during the month of trading the account manager received a 20% return, then the investors' deposits will increase not by 20%, but by 10%, since according to the terms of the offer, the trader will receive 50% of the investors' funds.

2) If a trader goes into a drawdown of 10% in a month of trading operations, then each investor will incur a loss of these same 10%. In this case, the manager does not receive any remuneration.

How to choose the right PAMM account manager?

• It is optimal that at the time of choosing an account for investment, the managing trader has been trading with a broker for at least a year. The thing is that based on this data (trading history), the trader's strategy is just visible - whether it is successful or not very successful. Usually, during this time, the trader should fall into a drawdown at least once. If after that he leaves it within 3-4 months, then there is not much point in investing money in this manager.

At the same time, among traders, there are often beginners who “drain” all their capital at the very first drawdown. That is why you should look closely at those managers who have successfully worked for more than a year and clearly demonstrated the results of their trading.

• Always pay attention to the maximum drawdown indicator itself. This indicates the level of aggressiveness of trading, that is, the level of risk. It should be noted that drawdown in trading is absolutely normal.

As for the maximum drawdown, it means the largest loss made by the trader in the entire visible history PAMM accounts. So, if in the parameters of a certain account you notice that the maximum drawdown rate is 50%, then this means that you risk losing 50% of your funds if you invest money here.

Let's take one of the examples ICE FX PAMM accounts Let's see how to determine the maximum drawdown level.

• It is worth adding that investments in the foreign exchange market are always associated with risk, which must be compensated by a corresponding high return. Therefore, it is important to pay attention to the annual profitability of the account. If it is too small compared to the maximum drawdown, then it is better to refrain from investing in this manager.
• In this case, of course, it is important to pay attention to the annual and total profitability of the account. To see detailed account performance, simply scroll down the page to the tab " Yield". There you will see detailed profit reports for each week. As for the overall profitability, these parameters are easy to find in the same place as the information about the maximum drawdown.

It is also important to add here that with respect to its annual profitability PAMM accounts are divided into three main categories.

1. conservative accounts. They are low risk. The usual annual yield is up to 50-60%. The largest drawdown in this case should not exceed 20-30%.
2. Moderate Accounts. They are distinguished by moderate risks and a yield of about 70–120% per year. The maximum drawdown is usually 30-50%.
3. Aggressive accounts. They have the highest risk. Profitability can significantly exceed 120% per year. The largest drawdown exceeds 50%. But such accounts often “do not live” for a long time,

Also, when choosing a trader, the size of the manager's capital also plays a significant role. The minimum amount in this case is $1,000. And the more this capital is, the higher the chances that the trader will try especially hard for profit, avoiding high risks.

Immediately below this value, you will see the total capital of investors. So, the more money is in management, the more confidence the trader himself inspires his investors.

Also, for the optimal choice of a suitable PAMM account, it is useful to be interested in the opinion of more experienced investors, which can be found on the relevant blogs and forums, and based on this data and your own analysis, you should make the final decision on investing money.

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.

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:

1. Investor.
2. Manager (trader).
3. 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 guarantees that the manager will 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 cyclicality. 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 the status of your account 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 a quite 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!

PAMM accounts allow you to combine traders and investors into one account and share profits among themselves.

What are PAMM accounts and how to understand them

Name PAMM comes from the English abbreviation Percent Allocation Management Module, PAMM, which stands for Percent Allocation Management Module.

In simple terms, a PAMM account is a trader's account in which investors can invest, and the broker controls the distribution of profits and losses.

How does a PAMM account work?

• The trader opens a PAMM account and starts trading on Forex, showing a confident and stable profit. The broker provides a rating of managers, which displays data on profitability, losses, capital. The trader sets an offer for investors, which indicates the minimum deposit to his account, the minimum investment period, for example, a week, as well as % of the commission from the profit, for example, the trader will keep 40% of the profit from the investor's money, giving the investor 60% of the profit.
• The investor looks at the broker's rating and finds a profitable PAMM account, which brings 4-6% profit every month. He registers with a broker, replenishes his personal account and transfers money to the selected account of the manager. For example, the investor's contribution amounted to 1000 USD, and the managing trader brought 10% profit in a month.

This is where the work of the PAMM account as a profit distribution begins.

10% of $1000 is $100 of which $40 will go to the trader as a commission (40%), and the investor will have $60 left. In total, the investor received 6% of net profit for the month.

The highlight is that an unlimited number of investors can invest in one manager, and the profit will be divided in proportion to their contribution. A trader with a large number of investors will receive 40% of all profits of all investors, being in a very favorable position, this motivates him to bring more and more stable and better performance. If there are 50 investors and each invests $1,000 and receives $60 each (under the conditions of the example above), then one trader will receive $40 from each investor, which will be $2,000.

• Nevertheless, this is his merit, and in order to collect a large number of investors, a trader must be not just a professional, but consistently make a profit. This is exactly what the investor needs and benefits.

PAMM accounts appeared in 2008 and are patented by a broker.

Later, they began to appear with other brokers, some of which turned out to be scammers and left along with the money of investors and traders.

Alpari remains the leader in terms of quantity and quality of PAMM accounts, where there are accounts with a capitalization of more than $2,000,000.

Pay attention to profitability indicators. The term of operation of many successful accounts exceeds a year, which is already an indicator of stability. Below we show a couple of examples of monitoring individual managers:

Pay attention to the amount in management ( on the screen above it is 4.5 million dollars, on the screen below 421 thousand), as well as profitability indicators for the last year and half a year.

When investing, you must use the rules of diversification, that is, you need to invest in several PAMM accounts at the same time in order to reduce risks.

Video about what PAMM accounts are - expert opinion

Main contributors

The main participants are managing traders and investors. The former trade on the market, while the latter place their funds in order to earn from the trade of the former. The system is very simple and, at the same time, extremely effective.

What is the interest of the managing trader?

Why does he need investors at all, because he can earn on the markets himself? The fact is that not every trader, no matter how good a specialist he is, has a huge capital for trading. That is why many people open PAMM accounts in order to get more funds for trading. In addition, the managing trader usually receives a share of the profits ( percent) from successful transactions and earn even more.

Investor risks

The investor bears 100% of the risk of his investment. In other words, the manager does not limit the risks of investors.

But investors have learned to reduce all risks to zero by creating portfolios - by simultaneously investing in 10-15 or more PAMM accounts. Not a single trader can constantly trade in plus, so if someone brings a loss for the current month, the rest of the PAMM accounts from the portfolio will block it with their plus.

Portfolio investments in PAMM accounts have become the basis for the investor.

If the manager has brought a loss to the investor, say (-7%), then until he brings his capital to a plus, the manager's commission will not be withdrawn. The manager's commission comes only from the investor's profit.

How to invest in PAMM accounts

Since 2009, many brokers have begun to offer the PAMM service, but to date, only the founder of this system has remained successful - a broker that is already working over 17 years. More than 65 thousand investment accounts and by the way, the broker has more than 120 billion of trading turnover per month.

At the moment, the most successful PAMM account has $2.9 million under management.

This speaks not only of the success of the manager, but also of the popularity of such investments among investors.

And the popularity of these investments is easily explained, because the minimum investment starts from 10 dollars which is available to almost everyone.

With only $150 you can already become a portfolio investor and make a profit doing nothing.

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