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Old 11-12-17, 07:01
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Default What is a PAMM Account?

PAMM stands for a percent allocation management module. It is a software application generally used for pairing client funds with a special discretionary account service provided by foreign exchange brokers. The manager's trading activity results - including profits, losses and trades - are compounded among central asset accounts accordingly to the ratio of investment on an account. As the currency dealing and other types of arbitrage operations attain profit-making capacity within very straitened margins, this type of management enables more currency to be engaged in trading while the risk is distributed usually between investors.

Using the PAMM Account as a means of pooling money into trading, the account manager can trade with larger volumes and therefore has the chance of receiving larger returns. Investors place funds in the manager's account and the manager's positive trading outcomes are reflected in the PAMM Account rating which, in turn, serves as an advertisement for the PAMM Account. The manager trades, generating profits which attract further investment and a larger amount of funds is traded on behalf of investors.

The participants of the PAMM Account structure include: the broker who provides the service, traders (or money managers) and investors. So, investors who want to profit from trading but lack the time or skill to do so need not trade independently; having only to invest funds in PAMM Accounts. So then, PAMM Accounts mean entrusting funds to managers. The managers are experienced and professional traders who manage others people's money along with their own capital.

The agreement between the manager and investors is outlined in the Manager's Proposal and is the basis for investor consent to take on a risk by making their money available to selected managers who will dispose of the funds according to their own skills and strategy. Furthermore, the agreement sets the size of the charge for the service manager provides. It may be a definite sum of money or a percentage.

The work with the account starts with its opening and the initial investment is the manager's capital: a non-withdrawable amount which secures the manager's interest in the account. The manager is not permitted to remove this capital as it serves as an assurance for prospective investors that the account will be operated responsibly. The managers advertise the account's activity, offering certain conditions and indicating profits received. As such, the brokers advertise the account in ratings on their websites, but they do not bear responsibility for any losses or profits as they are not involved in any trading activity.

Profits are then distributed at the end of each trading period between the manager and the investors. At the same time the broker may distribute funds, acting as a regulator where manager's act unfairly.

PAMM Accounts offer a lot of advantages to managers as well as to investors in invest in currency. If you are a successful trader acting as a manager, you receive profit not only from your own funds but also a percentage of the investor's profit and you can set this amount in the Manger's Proposal. The managers define the conditions, control degree over the trade terms, trade period and the distribution way of profits. These are the conditions that the investors must agree to.

For the investors the advantages are no less. The first benefit is the trading professionalism of effective managers. Additionally, there is a possibility to withdraw money from PAMM Accounts at any moment where investors are unsatisfied by the results and the manager's trading style. To reduce risk, the investor can diversify their investments across a number of accounts.
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