Asset investment has long since ceased to be exotic. Many owners of their own capital are willing to invest even under high risk conditions, taking into account the prospect of passive return on investment. Of course, high risk always gives good prospects for profitability, and here the leadership belongs to PAMM-accounts – an investment instrument actively used in the Forex market. Passive investment within the framework of this trading floor confidently shows from 30 to 100% of annual income. And these are far from being the limit values – in some cases, revenues can reach 150 and even 200%. But all this is possible only if you know how to choose a PAMM account manager.Selecting a PAMM Account Manager for ForexWhat is the basis for choosing a trustee for any type of investment? On his performance indicators. Accordingly, before choosing a manager of a PAMM-account, it is necessary to get acquainted with its trading history and reputation in more detail. After all, 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 risk of the Forex market, to approach the questions of choice with all responsibility. Otherwise, due to ill-conceived or hasty actions of the manager, you simply run the risk of being left without the invested funds after a couple of weeks or months after the beginning of your investment activity.How does the choice of PAMM account manager begin? With the choice of a Forex broker or brokerage company, ready to act as an intermediary in the relationship between the trader and his clients. How to choose a brokerage company? Pay attention to its reputation, duration of work, number of traders cooperating with it. Of course, it is better to choose large brokerage organizations, well-known to all forex traders, with many years of experience and excellent reputation. But sometimes it is necessary to take a closer look at private companies that work directly with PAMM-accounts of their clients.Choosing the manager of the PAMM-account, it is necessary to be guided by:1) Trading experienceOf course, we do not take into account mythical “many years of experience”, but real terms of existence of the PAMM-account, in which it is proposed to invest. Minimal experience, which should be considered – from six months, or better, a year or two of real work. It’s worth paying attention to moments like this:
- Openness of access (if closed from the very beginning, this is a disadvantage rather than a plus, as it indicates that the manager has something to hide);
- the total amount in the account, the higher it is, the better. Accounts with $100 in balance should be on the lookout from the start, unless they are educational;
- 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 ratesThere is a golden rule: not to invest in PAMM-accounts with a drawdown of more than 50%, as this indicator indicates the haphazard actions of the manager. That is, with about this fraction of the probability you can trade at random, placing funds in accordance with any principles, except common sense and investment prospects. Accordingly, the lower the drawdown on a particular account – the more cautious the trader acts, and the lower the risk of losses for investors. Of course, there’s no such thing as lossless trade. But the investor should understand that there are reasonable limits within which he is ready to incur losses, and there is an unjustified risk when the deposit is “merged” in a matter of minutes. And it would be better if your manager avoided such situations.3) Number of transactions and duration of the trading periodIf a trustee does not have time to close deals “in plus” 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 the risks due to the diversity of trading operations. At best, such tactics leads to the fact that trade in the Forex market is breakeven, but not profitable. At worst, at a certain stage unprofitable transactions that are not closed in time will simply drain the deposit of the PAMM-account.Pay attention to the duration of the trading period – ideally it should not exceed one month. And all open trades must be closed within the same trading period.4) Level of investor confidenceIf a PAMM-account cannot gain the necessary number of investors, it is an indicator of lack of trust. Combined with little experience and a highly risky strategy, this may prove to be a failure. Do you want to increase your chances of success? Trust your funds to managers whose reputation is beyond doubt to investors.5) Profitability of PAMM AccountInformation about the profitability of a PAMM-account should be studied most carefully. Traders who choose conservative trading methods are characterized by the profitability of accounts at 30 – 50%, for moderately risky trading – about 100%. Accordingly, the profitability of the account at 8 – 10% per month may well be considered good for investing in Forex. The study of charts displaying the trading indicators of a particular account will help to determine its indicators.PAMM accounts and chartsThe yield curve is the main instrument used for analyzing PAMM account data. It shows the actual changes in yield according to the set time frame. The chart can display the trading situation from the moment the account is opened or for the period chosen as the settlement period. The points marked on the chart are the fixed profitability indicators of the account, reflecting the dynamics of its development. It is with the help of the chart that it is possible to determine not only the overall rate of return, but also to track the fluctuations, drawdown and growth of investment success.Negative dynamics, a large number of “drawdowns” on transactions is always an unjustified risk for the investor. That’s why, while observing significant fluctuations in the chart, it is worth thinking about refusing to cooperate with such a trader (Fig. 1). However, the perfectly even line of the chart indicates rather the manager’s inactivity. However, gradual growth trends with insignificant drawdown, which do not have a serious impact on the overall picture of profitability – a sign of stability of the manager, the presence of his own trading strategy, which allows him to minimize the risks (Fig. 2). However, the chart on which the profitability indicators gradually tend to go up almost without any drawdowns, may turn out to be a treacherous trap. Sooner or later, there will be a collapse. And at that point, the risk of a full drain of the deposit will be extremely high.
Fig. 1
Fig. 2However, everything depends on the choice of investment strategy. Thus, on PAMM-accounts with significant loss/return fluctuations it is possible to earn good money, if you enter the market at the time of the peak of income decline and withdraw from it the profit at the peak of growth (“withdrawing cream”). But such “roller coaster” is unlikely to be of interest to the majority of owners of large capitals who want to get a stable return at a minimum amount of risk.However, the steadily negative dynamics of profitability on the account, acquiring similarity to an avalanche – that’s the right reason to refuse to cooperate with the manager in the framework of such a PAMM-account. Only a handful of people know how to get out of a deep pit of losses. But every woeful trader will be able to take with him a couple or three unlucky investors.Another useful chart for the investor shows the degree of deposit utilization (Fig.3). That is, it determines the nature and frequency of transactions. Thus, zero load demonstrates the absence of open deals on the deposit. And in general, the higher the deposit of a PAMM-account 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 investment should arise immediately.
Fig. 3The same applies to charts that do not show any signs of loss limitation. Playing at high risk brings good returns. But only until the amount of losses and leverage in use reaches certain limits. And they’re followed by a collapse and a permanent drain of the deposit. Is it worth the risk, if you can assess the degree of risk at the stage of studying the schedules of PAMM-account?Selection of the manager of the PAMM-account: platforms and ratingsNot all forex brokers work with PAMM accounts. Accordingly, the investor’s choice is mostly limited to a few large trading systems.AlpariThis is the platform that introduced the concept of PAMM-accounts. And to this day it remains the largest segment of trust management on Forex. More than 1000 trustees offer their services here, and account ratings allow you to monitor not only the profitability, but also a lot of other important indicators. Also, the investor can limit losses on his own deposit involved in PAMM-investment and withdraw funds within a fairly short period of time (usually about a day). And trading periods on this platform are limited to 1 month.Panteon FinanceThe platform is unique in that it allows you to place funds not only in the PAMM-accounts of your own traders, but also on third-party brokerage platforms. The company’s service initially focused on attracting successful managers and today such famous traders as Skilled, Fenix, Lion and others work here.FOREX-TrendDealing center located on the territory of Ukraine. The site is distinguished by a high entrance threshold for investors – on average, from 1000 USD. Despite the relatively short period of existence, the platform has already managed to get its own “pool” of successful managers, showing almost lossless trading. Among them are Sven, TP, Avas and other rating leaders. The site is distinguished by two types of accounts – with 50% loss limitation (PAMM 2.0) and classical ones. The standard trading period here is 7-14 days. Withdrawal of funds from the account is carried out only after the end of the trading period.