Ever since the currency exchange realm has opened up to individual investors, it is seen more and more in people’s portfolios. However, for most individuals, holding down a 9 to 5 employment takes precedence over trading constantly. This obstacle has caused many aspiring traders to seek a way to enter into the world of financial trading without having to invest hours of their own personal time. Therefore, many brokers have taken advantage of this demand by supplying opportunities such as PAMM accounts to investors and clients who look for a more passive income.
PAMM stands for Percentage Allocation Management Module. These types of accounts are comprised of numerous deposits from multiple investors and are controlled and traded by a Money Manager. The managers of such accounts are generally professional traders, experienced in maximizing profits of their accounts and for their investors. Each individual investor may allocate their personal funds to one or more PAMM account and manager. Overall, these accounts feature a management module that distributes the sizes and results of trades according to an allocation percentage amongst the various investors that contributed to the overall capital of the account.
For example, suppose the manager makes a 100-lot trade on EURUSD. This trade is then divided amongst the individual investors based on each investor’s contributing percentage to the manager’s account. This means that if the size of an individual investor’s contribution is equal to 1% of the manager account's equity, the size of the trade will be one lot (1% of 100 lots). Any profits, losses, and fees are distributed according to this percentage as well. Usually most modest managed accounts earn up to 20% per month or more while others have been known to earn 20 times the amount they started with. However, finding a managed account that is consistently profitable is a difficult challenge and there are no guarantees that contributing to such a managed account will be a profitable venture
Overall, managed accounts such as PAMM systems are a good way to leap into the world of trading and forex, as it allows investors to receive professional results while not committing to the workload themselves.
Ultimately, one can use a managed account like ones found in PAMM systems to learn how to trade through the help and guidance of an established money manager. Once the individual investor better understands the fundamentals of the market they can then begin executing small trades in a demo account themselves, leading to trading independence.
