As you have already understood, this article is devoted to PAMM investments, an alternative to independent trading. So, what do people usually invest in and why?
What Forex investment is
So, we all know that the Forex market lets us make profits from the difference in currency rates. A person trading in the currency market is proudly called a "trader". Traders examine the market, use trading indicators, follow trends, explore entry points and try to catch the best moment for closing a trade. To conduct the above operations, the trader needs some money in his/her trading account. They are needed for buying assets and selling them at a better rate later on. So, what you can invest your money in to make profits is a professional trader's account. It's the trader that will be trading, not the investor. The investor chooses a successful trader, invests in him his/her money and earns profit from the trader's trades. It's lucrative for both parties. A trader wishing to increase his/her trading volumes creates a PAMM account. An investor makes investments in the PAMM account of the trader whose results he/she finds impressive. Finally, the trader increases his trading volumes and income, while investors have their share without having to trade on their own.
One's own deposit or investing
Now you may have a question: if currency trading is so lucrative, why do we need to entrust our money to somebody else when we can trade independently? That sounds right: you can trade by yourself and have profits higher than a percentage in somebody else’s income. But you need pretty much time for reaching the level of PAMM account holders. And time is money. Literally. You can lose some while learning to trade, acquiring necessary skills and applying your experience in practice. The currency market is a sophisticated mechanism. It may turn your life into a fairytale, if you study it right. But it's going be quite hard for novices to reach this level, even if they are lucky. And PAMM accounts normally belong to experienced traders who understand all the subtleties of the Forex market and never act rashly. You might say that they used to be novices too. Naturally! But you still need to realize that you'll have to content yourself with experience rather than big victories at the very beginning since novices don't normally earn much or else they are at risk. Anyway, it's you who need to make a choice. And we are here to help you.
Pros and cons of independent Forex trading
The main advantage of independent trading is undoubtedly a possibility to control the whole process. You are the main actor here. Your own master. You decide on the lot, time frame and currency pair. But you are the only responsible person too. So there'll be nobody to blame but yourself. All the benefits result from the above mentioned things too: you choose the adequate risk level on your own, assess the market situation, miss or grasp at opportunities. So, your profit is only limited by yourself, depending on your own reasons. However, there's one major drawback that we've mentioned earlier. Trading requires serious education and considerable time expenses. You can't become a pro in the blink of an eye. You'll have to enjoy a "novice" status for a while, accumulate some knowledge and learn from mistakes. What's more, being a trader means to never stop. This profession requires constant development: you'll need to follow all kinds of news (economic, political, social, and so on). Trading is somehow a lifestyle that can realize your most cherished and costly dreams.
Pros and cons of PAMM investments
The main advantage of PAMM investment over independent trader is that no politics, economics or other kinds of knowledge are involved. Your spare time is fully at your disposal. You can invest in PAMMs, earn profits and at the same time spend your free time the way you want. Nowadays, we call it "passive income". Basically, the pros and cons of investing are opposite to those of trading. When investing in a PAMM account, an investor has to entrust fully his/her money to the manager of the PAMM account, that's why he/she must choose a PAMM trader carefully.
What should a novice do?
Novices can invest in PAMM accounts not only for making profits but also for learning from professionals. Firstly, you may watch professional traders working online and compare it to your own trading behaviour, which is the priceless experience. Secondly, the passive income earned from the PAMM account will allow you to cover some losses that you will inevitably have while learning to trade.
That's all for now, friends. I hope this article will be useful for you. See you soon and good trades to everyone!
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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.