What PAMM services should NOT be trusted? 5 PAMMs I don't invest in
Today in my author's column I would like to discuss the quality of PAMM-services. I and my colleagues have already written many times about how to choose such a service, how to decide on a trust manager and the amount to invest, and other issues (see PAMM Investing section), but this time we will talk to you in a different context... In the context of the safety of your investments and their protection from fraud on the part of the company, "unexpected" bankruptcies and draining of incredibly successful traders.
"PAMM-services" in a beautiful package
It is hard to say whether today there are traders with more than 5-6 years of work experience who have not suffered in one way or another from brokers and dealing centers that suddenly closed down. A special resonance was caused by bankruptcies of those companies, which were very actively advertising their PAMM-services, attracting unbelievable investments from those who do not understand the work of the currency market, and even from professional speculators. The basis of advertising campaigns of such services were stable earnings of the most successful trust managers, the percentage of their profit and unconditional and fast withdrawal of funds on any, even large requests from clients, for a long period of time.
Of course, such PAMM services attracted attention and put to sleep the vigilance of even the most demanding investors. Ordinary human greed prevailed over reason, vigilance and thoughts that it is impossible to earn 20-30% monthly on the market without any drawdowns for a long period of time, and if it was possible, the statistics would be given to look at and check: when there is something to boast about, trust managers always do not mind to do it! As a result, investors from many countries were drawn into the adventure. And of course, when the services began to close one after another, citing the mistakes of managers, the intrigues of competitors, the crisis or even simply ceasing to respond to complaints, silently evaporated, closing the site, it became clear that under the beautiful wrapper of a pile of zeros in dollars lies a simple pyramid scheme, familiar to all of us from the history of "MMM".
In fact, we can all still hear the echoes of these stories. The flow of complaints to central banks and regulators was so serious that market has become equal to a casino, reasonable traders may be deprived of the opportunity to work on the currency market and earn a living in familiar conditions, and honest companies will either be banned from providing services to us or their competitiveness and profitability of doing business will be drastically reduced. Such a development of events will be a dead end for everyone, so in this article I would like to tell you about it, what, in my personal opinion, PAMM services should not be like. I hope this helps our readers avoid complications and unforeseen losses where there are big profits and no transparency at all.
Which PAMM I will never invest in
So, you and I should not invest in a PAMM service that:
- It does not warn about the risks of investments, the possibility of losses of up to 100% or more of own funds, and does not say that the profit of past periods does not guarantee a similar result in the future.
- Despite a rather short period of work, it has a large list of managers. It is especially dangerous when these managers are profitable in a large percentage, but their statistics are closed.
- One way or another, it covers the percentage of the trader's loss and the aggressiveness of his trading.
- Does not give an opportunity to view the trades of at least a part of traders.
- Avoids questions of confirming the statistics of those traders who show questionably stable results, are the objects of advertising and commercial offers.
1. the risks are clear!
Trading in the financial markets and investments are associated with the possibility of rapid loss of deposit both by a beginner and a professional trader. If a trust manager understands the issues of capital management and uses these rules in a disciplined manner, then such surprises, of course, do not occur, but a person always remains a person, so PAMM service cannot guarantee stability. On the contrary, he should warn each of his clients that losses can amount to more than 100% from investments, and profitability of past periods is not a guarantee of profitability in the future.
Everything is very logical: market dynamics change, strategies change, sometimes adjustments in tactics are necessary, and we are not talking about trading on news and sudden force-majeure fluctuations. A decent PAMM service should tell about all this in a clear and understandable way. Then there will be no surprises and the trader and claims to the company.
2. The rating is not perplexing
Recently I saw an announcement about a new PAMM service of one of the companies that invited investors. Being interested in the new offer, I looked there and was amazed. According to the company's requests, they had been working for 3-4 weeks, but the list of managers was more impressive than the services of many old-timers of the industry! It was doubly strange that 70% out of all managers had profitability of more than 100%(!!!), and somewhere they were over 600% (!!!).
I have studied in detail the issue of investments in PAMM, many times I have communicated with brokers, who were in search of managers after the opening of the service, and I know for sure that it is impossible to recruit such a number of really trading, really profitable traders in such a short time without active advertising (even with very active advertising)! Well, there are not so many of them available, first of all, and secondly, no one will run to a new company if everything is fine in the current one.
When I went to our forum to read what traders write about it, I was relieved, almost everyone was in solidarity with my first impression that such a rating does not confirm the reality. It is good that people understand what should be and what cannot be in PAMM service!
3. The percentage of loss is not transparent
Many companies suffer from these mysteries of hiding profit/loss percentages in one way or another. Wanting to show only beautiful figures in pursuit of clients, they complicate the process of calculating losses (everything is usually clear with profits) and correct perception of the situation by investors. Of course, you can always figure out for yourself who and how from the investors' portfolio traded incorrectly, what was the loss, what percentage it gave from the total volume, how much profit it all gave per month, who to exclude and so on, but sometimes it can be inconvenient and annoying.
Well, consider this: I have 10 traders in my portfolio, the percentage of profit per month is 7%, let's say. At the same time, someone gave me 20% of profit, and someone -15%. Of course, I want to see the whole picture and evaluate it as comfortably as possible in order to make adjustments. In some PAMMs it is very difficult, I would like the companies to meet their clients and revise their services for transparency and openness for the client. Maybe not everyone is aware of this and they should just take a closer look inside their system, but for sure there are brokers, who can benefit from such difficulties for their clients. Therefore, if you have problems with understanding the workings of PAMMs, do not invest in them!
4. Clandestine traders
Underground traders are those who actively hide all of their stats. Sometimes, but not often, it is justified. Usually when the strategy is simple, but profitable, and it can be read by history, well, or because of severe paranoia. PAMM services allow managers to hide their trades, it is right, there should always be a choice. But I would not recommend to get involved in the work of these traders. It is impossible to assess how adequate the strategy is, if the concept of Money Management etc. It's a black box investment, unmeasurable given point 1, it's a waste of time and money.
This point is especially important for those managers, which are actively advertised by PAMM service and from which the commercial offer is built. If a trader gives 100% of profit per month and never trades at a loss, there is only one conclusion - either it is an offer or a martingale. Both of them will not bring us joy. If someone does not understand, from PAMM-account, where the robot works on the principle of Martingale, usually you can not take the money that is in the trade. Until the drawdown closes, you will not see the real picture and your investments.
5. Don't bother me, I won't show you!
Imagine, I am a trader who makes 20-100%% profits per month on a non-aggressive and very stable strategy. I have 300 investors and the total investment volume is off the charts with zeros. I work without losses for more than 6 months in a row and never show my statistics to anyone! To any questions about independent monitoring, which will not even open trades, but will show the truth about the account, I say no... That's how modest I am 🙂 .
There are only a few such people among traders. The probability that in one service 2-3-4-5-10 such traders gathered at once tends to zero at the speed of light! Please, do not believe in these explanations and listen to your inner voice - such PAMMs cannot be trusted. This is the law!
So, dear readers, what I wanted to say with this article. It is simple: there are no miracles and free money! Especially in the financial markets. Everything that concerns investments and earnings always requires special attention, wisdom and experience. There are wonderful companies in our field of vision with wonderful offers on management and PAMM accounts, don't think that all of them are bad. But, as everywhere, you should choose partners carefully and thoughtfully. Test, try, and not run after the interest on banners and promises of golden mountains.
Be careful and good luck with your investments in PAMM!
Pamm services should be used after thinking three times, at least analyzing comprehensively.
If a PAMM account gives 5% of profit per month, it is quite normal.