The modern financial system offers private investors a wide range of investment instruments. If previously the main way to place funds to generate income was a bank deposit, today the range of solutions is much wider.
One of the attractive and affordable options is investing in the Forex currency market through the PAMM (Percent Allocation Management Module) mechanism. Next we will talk about how to choose the right PAMM account and increase your capital.
Investments in PAMM, like any other, do not tolerate fuss.
What is a PAMM account?
Before we discuss our top providers in 2021, it's important for us to explain how PAMM accounts actually work. In its most basic form, interest distribution management module (PAMM) accounts allow you to invest money with an experienced investor. These are investors who have years of experience in online trading and results that you can independently verify.
As with a more traditional mutual fund, your money will be pooled with other investors. This allows the trader to buy and sell assets in a much larger volume, subsequently increasing the amount of profit they can make. In exchange for paying for such service, you will be entitled to your share of the proceeds.
There are three stakeholders involved in the end-to-end PAMM account process. It includes:
Investor
An investor is a person who invests money in the PAMM account service with the goal of earning money in a passive way. This is especially suitable for those of you who have little to no experience in the financial markets, and for those who do not have time to actively trade during the day.
Trader
To use the services of a PAMM account, you need to transfer your funds to an experienced trader. The respective trader will then be tasked with buying and selling financial instruments in the online space with the aim of making long-term profits. What's in it for a trader? Well, most PAMM account agreements provide for profit sharing. This means that, in theory, a trader will earn more money as his capital increases.
Brokerage Firm
Once a trader raises capital from investors, they need to use an online brokerage firm that allows them to offer PAMM services. After all, you are entrusting your money to a third-party trader, so having certain security measures in place is absolutely essential. First and foremost is a limited power of attorney agreement. In layman's terms, this means that you authorize the trader to buy and sell assets on your behalf on a specified online brokerage platform. Most importantly, this means that you accept full responsibility for any losses the transaction incurs on your behalf.
Note. The key difference between traditional mutual funds and PAMM accounts is that the former usually involves a long-term buy and hold strategy. In contrast, PAMM accounts are tied to traders who buy and sell assets on a daily basis.
Alpari Invest app
Alpari Invest is an application that will help traders working with PAMMs, structured products and investment funds to make transactions. Using the service, you can select portfolios and PAMMs.
Installing Alpari Invest is easy . First you need:
- register in your personal account ⇒
- then go to the section containing trading platforms.
The Alpari Invest application will also be available here.
An alternative download method is the Google Play and AppStore application stores. When the smartphone owner starts the download process, the installation of the application will begin. Once the process is completed, Alpari Invest will be ready to go.
How do PAMM accounts work?
When it comes to the investment process, there is a revenue sharing model. This means that the PAMM account trader you trust with your money will be financially motivated. Their fee is usually based on a percentage of their monthly profits.
Before we move on to a real example, we first need to understand what a PAMM account is. To simplify, let's assume that a PAMM account trader manages money on behalf of four investors. As is always the case, the individual trader must have a personal interest in the agreement. This ensures that they manage your money without risk since their own funds are at stake.
- Investor A (you) owns 15% of the shares of the PAMM account, which is $15,000.
- Investors B, C and D also own 15% of the shares.
- This brings the investor's total stake in the trader to 60%—or $60,000.
- The balance of 40% is invested by a real trader at a price of $40,000.
The trader has a total of $100,000 in his account.
Now that we know the structure of the agreement, let's quickly look at what a profitable month might look like.
Example of calculation at the end of the month for a PAMM account
- The trader is actively buying and selling forex pairs during May.
- Trader has a great month, profit 20%.
- With a balance of $100,000, this means the PAMM account is now worth $120,000.
- In theory, this means your initial investment of $15,000 has grown by 20%.
However, a PAMM account trader can make money, so he first takes his share of the profits. Let's say the trader's commission is 10%.
- In May, the trader made 20%, which is $20,000 in profit.
- By taking a 10% commission, the trader will earn an additional $2,000.
- This means that there is $18,000 of profit left to distribute among all PAMM account shareholders.
- 40% of it goes to trading and the remaining 60% is a concern between the four investors.
What happens if a trader has a month of losses?
In the example above, the trader made a pretty juicy 20% in May. Big! However, there is no guarantee that the trader will make a profit every month. Any PAMM account platform that tells you otherwise is providing false information. Thus, we need to estimate what will happen if a trader ends the month with a loss.
- In June, the transaction brings a loss of 10%.
- Assuming no one has cashed out their profits since May, that means the portfolio has lost 10% of its $120,000.
- With a loss of $12,000, the PAMM account balance increases to $108,000.
- Although your total investment in the account is towards profit (since it started with a balance of $100,000), the trade will not earn a commission this month.
Since a PAMM account trader can always face a losing month, this once again emphasizes the need to avoid withdrawals. By doing this, you don't blame yourself if your account balance drops at some point. This is no different from investing in a mutual fund. That is, although the best mutual fund providers have more winning months than losing months, there is still the occasional losing month.
PAMM account drawdown
An important indicator that you should pay attention to when choosing a PAMM account provider is the drawdown percentage. For those who don't know, this is the maximum percentage of losses experienced by a PAMM account trader relative to the account's peak value.
- For example, let's say the account costs $200,000 per month and $220,000 per month.
- The PAMM account peak is $220,000, as this is the highest amount the portfolio can be worth.
- If the PAMM account was worth $190,000 in month 3, we would need to calculate that figure relative to the peak, which is $220,000.
- This means that the maximum drawdown on the account is 13.6%.
In layman's terms, this means that if you had invested in the PAMM account at its peak in the 2nd month, your total investment would have been 13.6% less in the 3rd month. To return to breakeven, the trader would need to make a profit of 15.79%.
Ultimately, you need to find a PAMM account trader with a low drawdown rate, preferably for at least 12 months.
How much can you earn
The main problem of a novice investor is inflated expectations; looking at the PAMM rating, you might think that earnings of thousands of percent is what investments in PAMM can easily provide.
But there are no fairy tales, trading is a profession with its own risks, knowledge and experience.
After years of working in the Forex market, I can give the following profitability figures:
| Profitability | Risk |
| up to 40% per annum | Conservative |
| from 40 to 120% per annum | Medium risk |
| from 120% per annum | Increased risk |
| from 1000% per annum | Extra risk |
What is the role of a broker?
As noted earlier, an online broker is necessary to facilitate trades from your chosen PAMM account provider. In turn, the trader will have to pay a number of fees and brokerage commissions. Since you have a financial interest in the trader, these are additional costs that need to be taken into account. Most importantly, the broker in question must be able to support PAMM account agreements.
In other words, it is not as simple as investing with an experienced trader and then letting the trader use your money with any broker of his choice. On the contrary, a number of security measures must be put in place to ensure that [A] your money is ring-fenced from the trader, meaning there is no way for them to withdraw funds into their own account, and [B] you are able to transparently verify the investments that the trader does on your behalf.
Latest live reviews of PAMM accounts and final conclusions
Getting to know the opinions of real investors is necessary to create a true understanding of the advantages and disadvantages of PAMM accounts and exchange transactions. Finding truly objective judgments turned out to be not so easy; there is a lot of outright hype, flood and off-topic content, the authors of which pursue their own selfish goals. Nevertheless, the selection includes real reviews from real people who evaluate the broker’s activities differently. These are both positive and negative reviews.
Attention! The review did not include overly enthusiastic or outright abusive opinions that are filled with forums. There is no truth in extremes, which everyone who wants to test their strength in currency trading needs to know.
Choosing a PAMM account provider
One of the most difficult parts of the ongoing PAMM account process is choosing a trade that you can trust with your money. After all, it is the trader who will be making the key decisions about which assets to buy and sell, so it is important that this person has a long track record of making profits in the financial markets.
To help you along the way, below we have listed some considerations to keep in mind when choosing a PAMM account provider.
- diversification
First of all, you need to make sure that your PAMM account is very diversified. This starts with you using multiple traders. For example, let's say you have $10,000-2,000 to invest. Instead of putting all your eggs in one basket, it would be much more profitable for you to invest in five different traders for $100 each. This way, if one of your traders experiences a losing month, there is always a chance that you will still make a profit.
- Minimum account
Each PAMM account provider sets a minimum account size. This is the minimum amount of money you should invest in a trader. While this may cost several hundred dollars in some cases, some platforms will require significantly more. It is important to make sure that you only invest an amount that you are comfortable with.
- Asset classes
PAMM accounts cover almost every conceivable asset. Whether it's blue chip stocks, currencies, energy or gold, there is likely a trader with experience in your preferred market. With that said, you should also consider diversifying across multiple asset classes, just as you would diversify across multiple different traders. At the same time, you will not be overly exposed to one market.
- Proven track record
You may come across a PAMM account provider who claims to earn more than 70% per month. As cool as this sounds, is there a way to verify this information? Otherwise, claims are unlikely. With this in mind, choose providers that give you access to verifiable trading results.
This should include key metrics such as the types of assets the trader is buying and selling, what bets they are using, and what their monthly returns have looked like since the trader joined the platform. Likewise, your research process should also take into account the maximum drawdown we talked about earlier.
- Commission
PAMM account traders are in the business of making money. This is why they are keen to manage your investments as they generate greater returns. This way, the trader will receive a percentage of any profits he makes on your behalf. There is really no hard and fast rule as to how much you should pay as the commission should reflect the trader's experience, skills and historical performance.
In other words, it is much better to pay 20% commission to a trader who consistently makes profits than to pay 5% to a trader who struggles to make profits! Don't forget that some of your profits will be eaten up by the commissions charged by the broker, so make sure you understand how it works before you sign up.
- Choosing a brokerage firm
You must ensure that the PAMM account provider uses a regulated brokerage firm to facilitate your trades. The platform in question must be licensed by first-tier authorities such as the FCA, CySEC or ASIC. This ensures that your funds are always safe.
Likewise, the broker must be able to support the limited power of attorney agreements that come with the PAMM account. This way you confirm that the trader can make investments on your behalf.
- PAYMENT
In the payments department, you need to evaluate how you will be able to deposit and withdraw money into your PAMM account. The easiest way to do this is to fund with a debit/credit card and your payment will be processed instantly. Higher limits are offered when using a bank account, although this will delay the process by a few days.
Types of PAMM accounts
There are two methods you can use in your hunt for a PAMM account service.
Making ends meet: The first option is to use an all-inclusive provider who will make the whole process easier for you. Essentially, they act as an intermediary between investors (you) and the online brokerage firm. The PAMM account provider will likely have several internal traders that you may or may not select individually. As we'll cover shortly, this includes companies like World Markets and FXTitans.
Through a Broker: The second option you have at your disposal is to go directly to an online broker who services PAMM accounts. You will register on a regulated platform such as AVATrade, Insta Forex or Alpari. The process involves opening a trading account, depositing funds, and then choosing a PAMM account trader to invest in.
The option you choose will ultimately come down to personal preference.
Registration with Alpari
1) Go to the website https://alpari.forex/ru/ and click the “Registration” button
2) Enter your data and agree to the terms
3) Confirm registration via mobile phone number or email
Best PAMM accounts 2021: our choice
So, now that you know the ins and outs of how PAMM accounts work, you need to think about which provider you want to sign up with. As of 2021, there are literally hundreds of options to choose from, both for end-to-end managed accounts and direct brokerage services. With that in mind, we've narrowed down our list of the best PAMM accounts to five.
Before signing up, be sure to read our views on the recommended platforms listed below.
Global markets - Comprehensive servicing of PAMM accounts through a single platform
World Markets is a jack of all trades in the online investment space. The platform offers everything from full-fledged trading accounts to automated AI strategies and, of course, PAMM accounts. Since the platform is directly linked to the famous broker HYCM, you will be able to access thousands of financial instruments. World Markets offers a 360 degree PAMM account service and there are three account types to choose from. Firstly, the trial account gives you 30 days of unlimited access to your PAMM accounts, although you will need to make a minimum deposit of €2,500.
If at any point during the first month you are not satisfied with the end result, you can simply withdraw your balance back. If you do decide to stay on the platform, you will be able to choose a standard account or a Gold Premier account. The first option, which requires a minimum deposit of €5,000, carries a 20% profit sharing fee. So, if a trader earns you €500 in month 1, World Markets will receive €100 of it, leaving you with a profit of €400.
While it may seem expensive at first, you need to base your revenue share on overall results. On top of this, you will also pay a 1% annual maintenance fee. World Markets doesn't charge a markup on the spreads it can get, which is great. You will only be able to withdraw your balance at the end of each month, so keep that in mind. Finally, there are no fees for deposits or withdrawals unless you use a credit card.
For the Gold Premier Account, the performance fee is reduced to 10% and there will be no annual maintenance fee. The account comes with a number of additional benefits such as dedicated weekend support, affiliate bonuses and a free safe. With that said, to participate in this particular plan, you will need to maintain a minimum account balance of €25,000.
Our rating
- 30-day trial account with a minimum deposit of €2,500
- In advance about their revenue sharing model of 10-20%
- No markups on spreads or points
- The minimum investment amount for a standard account is 5,000 euros.
Visit global markets now
76.4% of retail investor accounts lose money when trading CFDs
FX Pig is an intermediary between you and independent Forex traders
FX Pig is an online platform that provides PAMM account services to ordinary investors. The platform actually partners with a number of pre-vetted forex traders and then acts as an intermediary between you and the trader in question. Specifically, the four PAMM account traders that FX Pig partners with are FXTitan, Vola, True Move and Onda.
With that said, it's worth spending some time analyzing each forex trader, such as the types of currencies they like to buy and sell, whether they tend to use leverage, and of course what they look like their historical trading results.
Once you find a trader you like, FX Pig can make the entire process of investing in a PAMM account easier. To get started, you'll need to deposit at least $500, and supported payment methods include debit/credit card, Skrill, Neteller, and bank transfer. Some PAMM account traders have a higher minimum deposit amount, for example FXTitan requires a minimum of $2,000. The same trader has a commission for results of 35%, which is very high.
This means that for every $100 in profit, the trader keeps $35. However, it is also important to note that FXTitan has a phenomenal track record in the online Forex trading market, which is why some investors are happy to pay 35%. As of today, FXTitan has a maximum drawdown of 8.8%, which is very good.%
Our rating
- Can connect you with verified forex traders
- Start with a minimum deposit of $500
- PAMM account traders undergo preliminary verification
- The 35% profit share fee is huge
Visit FX Pig now
76.4% of retail investor accounts lose money when trading CFDs
Insta Forex - PAMM account directly with a broker
Insta Forex is an online broker offering a wide range of financial instruments. This includes over 100 currency pairs, 88 stock CFDs, gold, silver and options. This particular option is different from the previous two that we discussed, rather than leasing, because Insta Forex is actually a broker and not a third party PAMM account provider.
So, you will need to open an account directly with the broker, deposit some funds, and then select the PAMM account trade that you want to copy. Insta Forex allows you to spread your funds across multiple traders, which is great for diversification purposes.
As for commissions, this will depend on the type of account you have with the broker and the specific assets the trader likes to invest in. Regarding regulation, Insta Forex is licensed by CySEC and FSC. You can receive money into your account from a debit/credit card, bank account or e-wallet.
Our rating
- Work directly with a reputable broker
- Low minimum deposit amounts on standard accounts
- Regulated by CySEC and FSC
- It is unclear about the PAMM account commission model
Visit Insta Forex now
76.4% of retail investor accounts lose money when trading CFDs
Alpari - Flexible PAMM account agreements
Alpari is also an online brokerage firm that gives you direct access to PAMM account traders. As with Insta Forex, you can select the traders you want to support based on their historical trading performance and preferred asset class. Some Alpari traders have years of experience exceeding seven years.
This is a huge amount of data that can be used because it will ensure that you are not backing a trader who has had a couple of good months. As for the basics, you will need to enter into an agreement with your chosen PAMM trader, in which you both define the types of trading strategies you want to use, as well as the agreed upon commission rate.
It is important to note that all PAMM account traders must deposit predetermined capital. This ensures that they are financially motivated to make as much money as possible, while at the same time not taking irrational risks. It is important to note that Alpari is a CySEC regulated online broker, so your money always remains safe.
Our rating
- Broker regulated by CySEC
- Registered PAMM traders using the platform
- Traders typically invest 40% of their money in a portfolio.
- You need to negotiate your own commission agreement
Visit Alpari now
76.4% of retail investor accounts lose money when trading CFDs
FAQ
What does PAMM mean?
In the context of managing PAMM accounts, PAMM means percentage distribution management module.
What is the difference between a PAMM account and a MAM account?
While PAMM accounts allow you to decide where to allocate your investment funds, MAM accounts provide much more flexibility for the provider. In other words, MAM accounts are even more passive than their PAMM counterparts.
How much do I need to invest with a PAMM account provider?
This will depend on the provider you sign up with. In our experience, full service providers (where the entire process is managed for you) typically require at least $2,000 to get started.
What is the drawdown of PAMM accounts?
Drawdown is a metric used to quantify the historical track record of PAMM trading. The calculations take the difference between the peak value of the PAMM account and the trader’s maximum percentage loss. For example, if a PAMM bank has an all-time high value of $100,000 and it is now worth $10,000, that means the maximum drawdown is $90,000.
How do PAMM account traders make money?
When you use a PAMM trader account, you agree to enter into a profit sharing agreement. For example, if a trader receives 10% of all profits he makes from a PAMM account, and at the end of month 1, a profit of $50,000 is made, the trader will receive a commission of $50,000 before the profit is distributed to investors .
