Where is more profitable to invest - in PAMM or LAMM?

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We continue to explore trust management processes at . В past articles in the series We have considered in sufficient detail the principles of PAMM accounts and PAMM sites, узнали о нюансах работы с ними. Однако на этом виды предоставления услуг доверительного управления на валютном рынке не заканчиваются. Есть другой вид автоматизированного инвестирования, который предлагается некоторыми брокерами, называемый LAMM. Давайте обсудим разницу этих двух услуг и попробуем определить куда выгоднее инвестировать — в ПАММ или LAMM.

PAMM or LAMM: the difference in definitions

So, let's start with the definitions:

PAMM (Percentage Allocation Management Module) is a percentage allocation system.
LAMM (Lot Allocation Management Module) - a system of allocation of trading volumes or lots.

As you can see, the difference between one system and another is expressed in only one word. In practice, however, the difference will be significant.

Mechanisms for implementing the modules and the investment process

Participation in PAMM account involves the accumulation of investors' funds in a single trading account of the manager. In this case, the distribution of profits is carried out in accordance with the share of investments of the investor in the total amount of funds, similar to the work of mutual funds. The calculation of profits is carried out by the PAMM platform at the moment of rollover.
Participation in LAMM implies the connection of the investor's account to the trading process of the trustee. In this case transactions are performed on each account separately. The system evaluates the manager's capital and the volume of his transaction and sends a signal to make a similar transaction on the investor's account, adjusting the trading lot in the percentage of the risk included in the trader's position.

Trading on a trust management account

PAMM manager trades on the account, where all deposits are placed investors. At the same time it adjusts the volume of transactions, taking into account the incoming and withdrawn investments. This is especially important when large amounts come or go, because an open large volume for a significantly reduced account can be fatal during strong movements in the market.
LAMM manager trades only on his account and only his own funds. Sometimes he may not even know how many investors are "tied up" to him and what the total amount of deposits is. All required adjustments to investors' accounts are made automatically by the system.

Making transactions on trading accounts

On a PAMM account, all trades opened by the manager work on invested funds.
In the LAMM system, a trade in the investor's account may not open if there are not enough funds to set the proportional volume.

Allocation of profits and losses

For PAMM investors the profit is distributed in proportion to the share of contribution according to the conditions offers at the time of the last rollover (usually once a month), or when the account is closed.

LAMM investors receive a profit net of commission at the end of the reporting period specified in the offer.

Size of investment

For PAMM accounts are not limited. Any amount can participate in trading.
The amount invested in LAMM accounts depends on the terms of the offer. Too small amounts in relation to the investor's capital simply will not work. For example, a trader has a 1000$ account and opens a trade for 0.01 lot. Accordingly, on account 100$ such position simply cannot be opened due to the limitation on the minimum size of the traded volume.

As we can see, these two systems of trust management, which differ only in one letter, have many differences in the mechanism of work. In this case, each of them has clear pros and cons. So, PAMM-account is very convenient for the investor, because trading system of manager is fully worked on his contribution, with the cost of the share is low enough. On the other hand, LAMM-accounts are convenient for the trader, as he does not need to constantly monitor the trading volumes, adjusting the strategy. Most brokers prefer PAMM, apparently because of the simpler implementation.

Так или иначе, что ПАММ, что LAMM системы гораздо эффективнее и безопаснее нерегулируемого доверительного управления. А уж, куда выгоднее инвестировать — в ПАММ или LAMM, решать вам в зависимости от предпочтений.

With the practical experience of investing in PAMM accounts you can read in this article:
Investing in PAMM accounts in practice: creating a portfolio on 500$