What is PAMM? It refers to the Percentage Allocation Management Module. Here, a professional forex trader manages trading amounts from different investors. We usually say that they manage pools and each investor owns a given percentage of the pool depending on the amount you invest. If the pool manager opens a position, it’s spread across the accounts of the investors’ equivalent to their percentage shares in the pool.
Let’s assume that you have $200,000 and the money pool has $1,000,000. This means that your percentage is $200,000/$1,000,000 = 0.2*100 = 20%. In such a case, your share in the pool is 20%. If the pool manager opens a single standard lot position, your account will open 20% of 1 standard lot position. This is basically what happens in PAMM forex.
What Drives One to Have a PAMM Account?
Of course, we have people who have money to invest but don’t have the time or the skills to invest in the forex trade. If you are this type of person, you can give your money to a trading manager who is highly experienced and will earn you good cash. If your money is controlled by a good trader, it will continue to grow more than when you operated the forex trade account without skills. You are only left to decide when to invest or not. Amazingly, the traders don’t have access to your money which makes the entire trading process safe.
Advantages of investing in a Percentage Allocation Management Module.
- You can make profits in forex trading without trading skills.
- You will continue with other businesses while your money grows on the other end. This increases your income.
- Investors have full control over their trading accounts. You can withdraw or stop trading anytime you wish.
- The trader doesn’t have access to your funds because you aren’t required to deposit the money into their account.
- Professional traders charge a friendly percentage of the total profit. For example, if you earn $1,000 and the trader gets 20%, you are left with a cool $800.
- The PAMM traders have much time to spend on the trading platforms unlike most of us who only do it after work.
Disadvantages of investing in a PAMM.
Though there are quite several advantages of PAMM forex, there are some bottlenecks too. Some of these disadvantages are listed below:
- You are trusting strangers with your money and hence you need to do enough research before allowing them to manage your cash. Go through their profiles to pick the most reputable and experienced traders.
- You might lose all your money if you work with a PAMM that hasn’t been into business for long. Try to get their previous performance before the high volatility in forex trading sweeps all your cash if you aren’t keen to withdraw it. Most of the successful traders seek to make monthly returns of 5% – 10%.
- Being the cash owner, you can’t know when the trader applies new trading strategies. You therefore can’t know when you are likely to lose your money.
PAMMs are the greatest option for unskilled forex investors or guys who have tight schedules that cannot allow them to effectively make money on forex trading platforms. The good thing is that the high demand for these modules has seen the trade managers improving their systems and making them secure. PAMMs can’t steal from the investor’s account and it’s only the investors who can authorize them when to trade.