In recent years there has evolved a new service in the forex industry known as Percent Allocation Management Module or PAMM for short. Some also refer to it as Percent Allocation Money Management which may be a better descriptor. A PAMM account in forex is a managed account, but it differs from traditional managed forex accounts in that the minimum investments are much lower and the invested money is pooled with the manager.
Percent Allocation Management Module is most usually used at Metatrader 4 brokers as this is the most common forex platform that includes the ability for money managers to run a PAMM account. PAMM is not the software, but is rather a process within the software whereby a trader can simultaneously manage an unlimited number of accounts which incur profits and losses as a ratio of the funds invested from each managed account.
How Forex PAMM works
A PAMM system at a forex broker needs three key elements to function. First it requires the necessary software which has the ability to run a master account linked to an unlimited number of other accounts. Next it needs a manager or master trader who will manage the master account and will trade the funds allocated to him or her. And finally it needs investors; individuals who are willing to entrust the master trader with their trading accounts. These investors assign a limited power of attorney to the master trader which allows him or her to trade each investors account.
Understanding Forex PAMM
If you can visualize a scenario where a master trader enters a trade and all of the accounts linked to that master trader simultaneously follow that trade with just one click then you are beginning to understand forex PAMM. Quite simply the master trader makes the decision which effects all the accounts which are following him and the profits (or losses) are then distributed among the accounts based on the ratio of their investment.
An Example of how PAMM Works
Trader’s activity results (trades, profit and loss) are allocated between managed accounts according to the ratio as explained above. In this example we will assume that there are 3 managed accounts under one trader’s management:
A US Dollar account with a deposit of $100.000 and ratio 9.3%;
A Euro account with a deposit of €400.000 and ratio 49.5%;
A Great Britain Pound account with a deposit of £300.000 and ratio 41.2%;
(for calculation of ratio amounts are converted in USD equivalent based on market rate).
Example: If the master trader makes the decision to buy 10 units of EUR/USD, PAMM will be in charge of distributing the order between the managed accounts according to its actual ratio. Each and every managed account which is handled by the manager will incur its own part of position and will share in the corresponding profit & loss.
In a current example the first managed account will get position LONG 930.000 EUR/USD, the second – LONG 4.950.000 EUR/USD and the third – LONG 4.120.000 EUR/USD. Resulting profit & loss will be automatically calculated for each account depending on market prices.
If a PAMM account sounds like something that would benefit you you’re not alone. Many traders use master traders and PAMM accounts for a variety of reasons. Some are drawn to the potential rewards of forex, but don’t have time to learn how to trade themselves. Some trade their own accounts as well as having a separate account managed by a master trader in order to provide some diversification within their forex trading. Whatever the reason, you’ll need to have an account with a broker that offers PAMM accounts and so I’ve put together a list of just such brokers below.
BroCo is one of the more prominent forex brokerage companies operating online to provide international market access to participants. With the assistance of modern products of excellent quality, diverse services and a dedicated team, Broco manages to cater to the variety of needs of retail traders and investors and provides them with all essential tools [ Read More ]
EES FX not only gives you the ability to open an account and trade through their ECN interface, but they also provide a wide array of custom indicators, expert advisers and other forex trading tools. It is a very complete offering of both trading and education as well as tools to make your trading more [ Read More ]
The International Financial Holding FIBO Group is a group of companies that utilize the latest innovations and cutting edge technologies for internet trading in most of the world’s financial markets and asset management fields. They claim to be one of the largest players in the Forex and CFD markets in the world. Internet trading in [ Read More ]
Forex-Trend offers traders a wide range of top quality services for both the experienced and newcomers, taking their first steps into the Forex markets. Forex-Trend is a No Dealing Desk (NDD) broker that delivers the clients trades directly to the International electronic system INTEGRAL. The distinction is that customers will take advantage of no re-quotes [ Read More ]
Gedamo Investments is a banking company offering access to the currency markets otherwise known as Forex. Gedamo Investments has a rapidly growing client list of both private and institutional traders and offers specialized services in currency foreign exchange in over 20 languages for 24 hours a day, 5 days a week from Monday through Friday. [ Read More ]
Hot Forex is an online forex and commodities broker. They offer various account levels, trading software platforms and trading tools and education to trade Forex and Commodities for individuals, money managers and institutional customers. Retail, Introducing broker and White Label Clients have the opportunity to access interbank spreads and liquidity via state of the art [ Read More ]
TradeX Capital is a London based brokerage firm specializing in currency Trading and is authorized and regulated by the UK Financial Services Authority. They offer financial institutions and investment professionals cutting edge technology solutions along with a gateway to interbank liquidity, allowing them to provide best-of-breed online trading facilities to their clients. The following five [ Read More ]
VertiFX provides a forex trading platform for all global currencies to suit forex trading world-wide, including the 6 majors and even the most obscure and exotic currencies. They serve FX trading clients all over the globe (excepting the U.S.). The people at VertiFX have 15 years of FX trading and support experience, and they offer [ Read More ]
