Investing in a PAMM account is one of the ways of passive income on . PAMM accounts on is provided by brokerage companies that organize your interaction with PAMM account managers through a website on the Internet.
- What is a PAMM account
- What is a PAMM account offer
- Advantages of investing in PAMM
- What you need to consider when investing
- How to choose a PAMM account for investment
- Algorithm of investing in PAMM
- Rules of investing personal capital in PAMM
- How to minimize risks in investing
PAMM is the Russian pronunciation of the English abbreviation PAMM (Percentage Allocation Management Module) - interest distribution management module. The PAMM mechanism is used in trust account management to manage the distribution of funds between the account manager and investors.
PAMM account is a variant of trust management in which a trader manages the pooled capital of investors through a single account. The account manager has access to the funds exclusively for trading operations.
Distribution of profits and losses based on trading results shall be made in proportion to participants' investments PAMM accounts and is governed by means of a public offer.
In most PAMM-resources, the investor assumes all risks associated with the trading process. In case the account manager's trading actions do not meet the investor's expectations, the latter has the right to withdraw his funds at any time.
Distribution of the received profit takes place at the end of the time interval specified in the offer. The usual time interval is 1 month.
In case of a drawdown during the set period, the account manager does not receive any cash remuneration until he/she restores the funds in the account to the previous level.
[info_block align="right" linkText="More about PAMM account offer" linkUrl="https://mr-trader.com/pamm-investment/oferta-pamm-scheta-sovremennyj-dogovor-doveritelnogo-upravleniya" imageUrl="https://files.fortrader.org/uploads/2015/01/pamm_2.png"]PAMM account offer - modern trust management agreement[/info_block]
PAMM account offer - agreement on the terms of cooperation between the trader and the investor, which the investor accepts by depositing his funds to the PAMM account. The offer defines the order of percentage distribution of income between the trader and the investor, as well as the terms of investment, penalties for early withdrawal of funds, as well as other conditions that depend on the site of PAMM account placement.
With the help of PAMM mechanism the process of funds distribution is automated, as well as the reduction of non-trading risks for both parties of trust management. In addition, the use of PAMM allows the trader to minimize the threshold value for minimum investments, up to 1 dollar, which significantly distinguishes PAMM accounts from traditional options of trust management.
- Your income is not limited in any way. There are managers of PAMM accounts earning up to 1000 percent per annum. Your only task is to choose the right managers.
- To get started, you need to have quite a bit of money. As a rule, no more than 100 dollars is enough. No other investment tool does not give an opportunity to enter with such a low threshold.[info_block align="right" linkText="PAMM-accounts - the optimal way to invest on " linkUrl="https://mr-trader.com/pamm-investment/pamm-scheta-investirovanie-dlya-vsex" imageUrl="https://files.fortrader.org/uploads/2015/06/investing-money.jpg"]Profitable investment of money. And maybe PAMM accounts on ?[/info_block]
- You can invest your money in several PAMM-accounts and entrust their management to several managers. Here it is easy to follow the golden rule of every investor: "do not put all eggs in one basket". Since any investment contains a risk, by separating the "baskets" of investment, the overall risk of losses is reduced.
- It takes very little time - a few hours - to deposit money into a PAMM account of a manager or, on the contrary, to withdraw it. All the management of your funds is done, of course, over the Internet in your personal cabinet. And at any time of the day or night.
- You are protected from fraud both from the manager and from the company that provides PAMM investing service. All operations are absolutely "transparent" - you can monitor the manager's work and the movement of your money.
- The manager's work in the past periods of his activity is open to you. You can analyze it (and there are convenient tools for this purpose) and make an independent decision whether to entrust the manager with your funds.
- The purpose of investing in PAMM
The main thing you should decide on is the purpose of investing in a PAMM account. The other indicators will depend on this goal. If the purpose of investing is to accumulate a decent pension, it makes sense to consider PAMM-accounts with low risks and average profitability for investments. If the goal is not so global, it is possible to consider shorter investment terms and increased risk levels.
- The volume of your investments
To calculate the optimal amount of investment in a PAMM account, you need to determine the amount of free funds remaining each month. That is, from the amount of all monthly income to subtract the amount of all expenses. It is necessary to take into account the availability of a certain "untouchable" amount, a kind of financial cushion, in case of force majeure: illness, job loss, etc.
- Desired level of profitability of PAMM account
Advertising persistently shows us that by investing in PAMM-accounts you can earn 100% a month from the amount invested and even more. As practice shows, such PAMM-accounts exist, but on such "fiction" is better not to orient. Of course, the yield, which shows the PAMM-accounts, exceeds the yield of bank deposits, but it is better to choose a PAMM-account with an annual yield of 50-120%.
- Risk level of investment
The level of risk when investing in a PAMM account directly depends on the level of profitability. We will not dwell on this, but it is necessary to note a very important point for the investment plan, namely - risk protection. The most important thing is that the funds you intend to invest in PAMM-accounts should be exclusively your own. Under the impression of high profitability, some people take money on credit, hoping to pay it off at the expense of the received profit. However, even with competent diversification, the level of risk will be too high, so such a plan is hardly feasible.
[info_block align="right" linkText="Rating of PAMM-accounts" linkUrl="http://forexsystemsru.com/rating/pamms" imageUrl="https://files.fortrader.org/uploads/2014/10/PAMM1-390×293.jpg"]Rating of PAMM-accounts, compiled based on feedback from forexsystemsru.com forum users[/info_block]
Resources that host PAMM accounts, as a rule, provide an open rating of PAMM accounts, which are sorted by profitability for a certain time period. By analyzing the indicators of PAMM-accounts and monitoring them, an investor can choose a more suitable account for investment.
Articles for investors on how to choose PAMM:
- 10 simple tips for PAMM investors
- What PAMM services should NOT be trusted? 5 PAMMs I don't invest in
- PAMM-account: learning to read monitoring correctly
- Choosing the best time to invest in a PAMM account
For the investor PAMM-service looks simple enough:
Quite a large number of brokers have PAMM-services, which provide a technical possibility for the existence of investment accounts. As a rule, such services from the investor's side are designed as a list of managing traders with the parameters of their work, offering their trust management services. The platform acts as a technical intermediary of these services, for which it takes (or does not take) its percentage of profit.
- PAMM account and manager's deposit
Then there is a managing trader, confident in his trading talents, who opens a PAMM account. On it he initially places his own funds, on which he will later trade, taking his position in the rating of managers. The larger the deposit, the more confident the trader is in his abilities. A manager can open several PAMM-accounts at the same time.
In addition to the account, it creates an offer, in which it prescribes conditions for investments of future clients. Depending on the PAMM-platform, i.e. the broker where the account is placed, the offer includes: the minimum investment amount, the percentage of profit distribution between the investor and the manager, the approximate profitability of the strategy and its rules, recommendations from the manager, the maximum drawdown of the strategy, levels of loss locking, etc.
After a PAMM account has appeared in the rating, investors have the opportunity to connect to it. To do this, an account is opened and funded in the same company where the PAMM is located, and in the personal cabinet or through the rating of accounts the investor presses the "Invest" button opposite the PAMM he is interested in. Depending on the broker and the platform, the process is somewhat different, but in the end, all or part of the funds on the investor's account are transferred under trust management.
It must be said that technically the funds do not go anywherethey continue to be on the investor's account. However, all transactions of the manager by lot, calculated as a proportion of the investor's investment amount to the total amount of funds in the account, are copied to the invested amount. The manager sees his account replenished for all amounts invested, so he can increase the volume of transactions.
More often than not, only new open trades appear on an investor's account. This is important to understand when connecting to the account. If a trader's strategy involves the use of locks or protective positions, it is better to wait until the current cycle of trades is completed.
- Yield statistics
Further, after the account is connected to PAMM, the investor observes the trading process in his personal cabinet. Almost always all statistics of the manager's work is available to him, but there are cases when the trader deliberately closes open or all transactions from viewing for his own reasons.
- Profit and loss
Profits and losses are distributed between the trader and investors automatically, most often once a day at a time called rollover. Losses are allocated in proportion to investments, profits - according to the offer.
- Exit PAMM
To suspend investment and disconnect funds from the management of PAMM-account investor can most often at any time, but there are options and daily delay to the moment of rollover and even a week. In this case, all companies have different process and accrual of funds. It is important to carefully study the regulations of the PAMM-platform in relation to the withdrawal of funds, so as not to be surprised later.
To summarize the above structure, in a nutshell, it sounds like this: You give your money for management to a trader under the control of a PAMM-platform, and for the services rendered you pay a portion of the profits.
These rules will help you competently create investment portfolioThe company will significantly minimize potential losses and maximize profits:
- Never invest the "last" money. Especially if you have just started to master investing, you should do it exactly as much as you would not be sorry to lose if you made an unprofitable investment because of little experience. Nowadays there is an opportunity to invest small amounts, which will help to understand all the questions on real examples.[info_block align="right" linkText="How much money can be invested in PAMM?" linkUrl="https://mr-trader.com/pamm-investment/optimalnaya-summa-dlya-investicij-v-pamm-na-foreks" imageUrl="https://files.fortrader.org/uploads/2015/03/PAMM.jpg"]Optimal amount to invest in PAMM on [/info_block]
- Try not to invest everything in one manager. It is better to distribute your investment capital among several managers.
- When selecting managers, pay attention to their trading style. Divide your investments between aggressive and less aggressive managers. In this way you will protect your capital from losses and will be able to receive a good percentage from aggressive managers.
- Choose proven brokers who have been providing their services in the investment market for a long time.
- To increase profits and improve stability, continue to invest regularly in new managers, not forgetting the proven ones.
- Before investing, it is worth studying reviews about the place of investment. All the necessary information can be obtained from discussions on the broker's forum.
- With each new investment it will be useful to study the ratings of managers, thereby forming the most profitable investment portfolio.
- When forming a portfolio, it is worth paying attention to the way the manager trades manually or with the help of advisors. It should be taken into account that the advisor has no emotions and trades strictly according to the algorithm. But we should not forget that even manually with a well chosen strategy managers show very good results.
- Before investing large sums, first form a profitable investment portfolio by investing small amounts. In this case, you will save your capital from possible losses associated with the selection of managers, but after the formation of the portfolio, you will be able to contribute the main funds and receive a stable and high income from them.
- You should never panic at large drawdowns on your account, and even less should you try to fix anything on your own. If you have already decided to entrust a part of your capital to management, you should not interfere with the manager. Especially for extremely aggressive traders, significant drawdowns happen quite often before a significant rise.
Choosing the right PAMM platform for investment is half the battle. The greater the profit, the greater the risks, so it is very important to diversify the risks by dividing your capital among the selected PAMM accounts.
- Don't strive for superprofits
Some investors have a rather frivolous attitude to investing, burning desire to maximize their profits every month, often taking unjustified risks, forgetting about the main rule of PAMM investing: it is good if you can get a small profit, and very good when you can earn a lot of money.
It is very important to have a reserve of patience and not to strive for super profitability. Usually, beginners, in pursuit of profitability, lose their money, while patient investors earn a lot of capital on their investments.
- Forming a PAMM-portfolio correctly[info_block align="right" linkText="How to properly form a PAMM portfolio" linkUrl="https://mr-trader.com/pamm-investment/pamm-portfeli-finansovyj-instrument-s-diversificirovannymi-riskami" imageUrl="http://files.fortrader.org/uploads/2014/09/diversifikaciya.jpg"]PAMM portfolios - a financial instrument with risk diversification[/info_block]
As for PAMM investing, some investors believe that their total return is zero. However, it is important to understand that this depends primarily on the components of the investment portfolio, and a zero return is only the first step to a positive result.
In PAMM-investing a monthly income of 30% is considered normal. Of course, there are managers who demonstrate much higher returns. However, in almost all cases, it is associated with aggressive trading tactics. If you have a large number of such aggressive accounts in your portfolio, the risk of losing money will increase significantly.
To select PAMM-accounts, you need to analyze them thoroughly, distributing them not only by average profitability, but also by riskiness. After selecting PAMM-accounts, you need to distribute the shares of your capital among them. The classical variant is the presence of approximately nine accounts in PAMM-portfolio, of which 10% - aggressive, 90% - conservative.
Including aggressive PAMM accounts in your investment portfolio is not mandatory. If you are satisfied with your monthly profit, you can do perfectly well without them, without the risk of unnecessary loss of your funds.