Trust investment has long ceased to be exotic. Many owners of their own capital are ready to place funds even under conditions of high risk-taking into account the prospects of obtaining passive income from investment investments. Of course, the high risk always gives good prospects for profitability, and here long-term leadership belongs to PAMM accounts – an investment tool actively used in the Forex market. It is a passive investment within this trading platform that confidently shows from 30 to 100% of annual income. And these are far from limiting values - in some cases, revenues can reach 150 or even 200%. But all this is possible only if you know how to choose a PAMM-account manager.
Choosing a Forex PAMM Account Manager
What is the basis for choosing a trustee in any type of investment? On the indicators of his work. Accordingly, before choosing a PAMM-account manager, you should familiarize yourself with its trading history and reputation in more detail. Indeed, the final state of affairs will depend on the actions of the trader to whom you entrust your own savings. And, taking into account the high riskiness of the Forex market, it is worthwhile to approach the issues of choice with all responsibility. Otherwise, due to the manager’s ill-conceived or hasty actions, you simply risk being left without invested funds a couple of weeks or months after the start of your investment activity
Where does the choice of a PAMM-account manager begin? With the choice of a Forex broker or a brokerage company, ready to act as an intermediary in the relationship of the trader and his clients. How to choose a brokerage company? Pay attention to her reputation, duration of work, the number of traders working with her. Of course, it is better to choose large brokerage organizations that are well known to all forex traders, with many years of experience and an excellent reputation. But sometimes it is worth taking a closer look at private companies that directly work with PAMM accounts of their customers.
When choosing a PAMM-account manager, you should focus on:
1) Trading experience
Of course, we take into account not the mythical “many years of experience”, but the real-life of the PAMM account in which it is proposed to invest. The minimum experience that is worth considering is from six months, and preferably a year or two of real work. At the same time, it is worth paying attention to such moments as:
- the openness of access (if it was closed from the very beginning – this is more likely a minus than a plus since it indicates that the manager has something to hide);
- the total amount in the account – the higher it is, the better. Accounts with $ 100 on the balance sheet should initially be alarming, unless, of course, they are training;
- the amount invested by the trader himself (shows his confidence in his own abilities). If the manager is not ready to invest more than 30% of his own funds, this is an indicator of high risk for the investor.
2) Drawdown indicators
There is a golden rule: do not invest in PAMM accounts with a drawdown above 50%, since this indicator indicates the unsystematic behavior of the manager. That is, with approximately this probability, you can trade at random, placing funds in accordance with any principles, except common sense and investment prospects. Accordingly, the lower the drawdown for a particular account, the more carefully the trader acts, and the lower the risk of losses for investors. Of course, breakeven trading simply does not happen. But the investor must understand that there are reasonable limits within which he is ready to bear losses, and there is an unjustified risk when the deposit “merges” in a matter of minutes. And it would be better if your manager avoids such situations.
3) The number of transactions and the duration of the trading period
If the trustee does not manage to close the transactions “in the black” and does not fit into the trading period – these are signs of low professionalism. Moreover, there are traders who consciously open a significant number of transactions on a long-term basis, trying to diversify risks due to the multidirectional nature of trading operations. In the best case, this tactic leads to the fact that trading on the Forex market is break-even, but unprofitable. In the worst case, at a certain stage, unprofitable transactions that were closed on time will simply merge the PAMM account deposit.
Pay attention to the length of the trading period – ideally, it should not exceed a month. And all open transactions must be closed within one trading period.
4) The level of investor confidence
If a PAMM account cannot gain the required number of investors, this is an indicator of a lack of trust. And in combination with little experience and a high-risk strategy, such an option may even be a failure. Want to increase your chances of success? Trust your funds to managers whose reputation is not in doubt from investors.
profitability Information on the profitability of a PAMM-account must be studied most carefully. For traders who choose conservative trading methods, account returns of 30-50% are characteristic, for moderately risky trading – about 100%. Accordingly, the return on the account of 8 – 10% per month may well be considered good for investing in Forex. And to determine its performance will help the study of charts that display the trading performance of a particular account.
PAMM accounts and charts
The profitability chart is the main tool used in the analysis of PAMM-account data. It displays real changes in profitability in accordance with the established time frame. The chart can display the trading situation from the moment of opening an account or for the period selected as a settlement. The points marked on the chart are fixed indicators of account profitability, reflecting the dynamics of its development. It is with the help of the graph that it is possible to determine not only the general indicators of profitability, but also to track the fluctuations that have taken place, drawdowns, and the growth of investment successes.
Negative dynamics, a large number of “drawdowns” in transactions are always an unjustified risk for an investor. That is why observing significant fluctuations in indicators on the chart, it is worth thinking about refusing to cooperate with such a trader (Fig. 1). However, a perfectly flat graph line indicates more likely the manager’s inactivity. But tendencies towards gradual growth with insignificant drawdowns that do not have a serious impact on the overall picture of profitability are a sign of the manager’s stability, his own trading strategy that minimizes risks (Fig. 2). True, the graph on which profitability indicators gradually tend to rise almost without drawdowns may turn out to be an insidious trap. Sooner or later, a collapse will occur. And at this moment the risk of a complete drain of the deposit will be extremely great.
However, it all depends on the choice of investment strategy. So, on PAMM accounts with significant differences in loss/profitability, you can earn good money if you enter the market at the time of the peak of the decline in income and withdraw profit from it at the peak of growth (“skimming the cream”). But such a rollercoaster is unlikely to be of interest to most owners of large capital who wish to receive stable returns with a minimum amount of risk.
But the stably negative dynamics of account profitability, acquiring resemblance to an avalanche – this is a good reason for refusing to cooperate with the manager in the framework of such a PAMM account. Only a few are able to get out of the deep pit of losses. But every grief trader can drag a couple of unlucky investors with him.
Another graph useful for the investor displays the degree of deposit loading (Fig. 3). That is, it determines the nature and frequency of transactions. So, a zero load demonstrates the absence of open deposit transactions. In general, the higher the PAMM-account deposit is loaded, the higher the risks and the greater the amount of leverage used. Given that credit funds are involved in trust trading, questions about the appropriateness of such an investment should arise immediately.
The same applies to charts in which there are no signs of loss limitation. Playing at high risk brings a good return. But exactly as long as the size of losses and leverage used do not reach certain limits. And already followed by the collapse and constant discharge of the deposit. So is it worth the risk if you can assess the degree of risk even at the stage of studying the PAMM-account work schedules?
Choosing a PAMM Account Manager: sites and ratings
Not all Forex brokers work with PAMM accounts. Accordingly, the choice of an investor, for the most part, is limited to several large trading systems.
It was this site that introduced the concept of PAMM accounts. And to this day, it remains the largest Forex trust segment. More than 1000 trust managers offer their services here, and account ratings allow you to track not only profitability indicators but also a host of other important indicators. Also, the investor is available to limit losses on his own deposit involved in PAMM-investing, and withdraw funds within a fairly short period (usually about a day). And trading periods on this site are limited to a period of 1 month.
A platform that is unique in that it allows you to place funds not only in PAMM accounts of your own traders but also on third-party brokerage platforms. The company’s service initially relied on attracting successful managers and today such famous traders as Skilled, Fenix, Lion and others work here.
Dealing center, geographically located in Ukraine. The site is distinguished by a high entry threshold for investors – on average, from 1000 USD. Despite the relatively short period of existence, the site has already managed to acquire its own “pool” of successful managers, showing almost break-even trading. Among them are Sven, TP, Avas and other ranking leaders. The site is distinguished by the presence of two types of accounts – with a 50% limit on losses (PAMM 2.0) and classic. The standard trading period here is 7-14 days. Withdrawal of funds from the account is carried out only at the end of the trading period.