PAMM investment was developed not long ago. However, the idea and the opportunities it offers impressed its pathfinders so much that almost every broker provides the PAMM service today just because it is extremely popular and searched for. Let's try to answer the question "why?”.
- Transparent scheme. If a brokerage company providing the PAMM service cannot boast the transparency of the system, run away! They still have plenty of thins to improve, so you'd better find a more serious company. The PAMM system must and can be transparent just because you invest money in it.
- Safety of participants. All the participants in the PAMM system are fully protected and cannot be deceived. Their roles and possibilities are explained in detail and everyone acts under a thoroughly designed technical platform.
- Profits for everyone. PAMM systems involve three parties: PAMM trader, investor, and broker. All the three participants receive nothing but profits. None of them would be happy is another failed, so all the parties are interested in large high-yielding trades on a PAMM account. The broker benefits from spreads and therefore is interested in active trading on a PAMM account. The manager earns from trading itself. The investor has a share in the manager's profits.
As a result, the PAMM service operates in quite an obvious and transparent way, and an elementary knowledge of mathematics is enough for calculating profits.
PAMM for dummies
Let's put in a nutshell the way the PAMM system operates. A broker's clients are traders, people that earn their lives by trading in the forex market. They make profits from the difference in currency rates using their knowledge of economy and the broker's technical platform for entering the currency market. Those traders who have been trading for a long time and are confident in their excellence are normally eager to increase their trading volumes. They are knowledgeable and experienced but they need more money for larger volumes. So they register in the PAMM service, open a PAMM account, set their remuneration for money management, 30% for example, and become PAMM traders. They continue trading but now they are watched by interested people - investors. Investors own money that they wish to use for earning a passive income. They watch the way various traders work and choose a PAMM account to invest in.
Different investors can invest in the same manager; the same investor can invest in different PAMM accounts.
Let's say an investor has chosen a PAMM account and invested 10 dollars. The manager continues trading and makes profits that are allocated among the participants in the PAMM account: the investors and the manager. At the same time, the investor can withdraw his/her money at any time or he/she may withdraw only the profit share and let the money work further.
How and how much can a Forex investor earn?
It is a very popular question, but not everyone tries to find the answer, preferring to idle and accuse the whole world of their problems and misfortunes. Well, let's leave them alone and find out in the meanwhile how much you can earn from forex with as little as, for example, 10 dollars. We have already learnt how to earn from forex. So, let's invest our 10 hard-earned US dollars in a manager's PAMM account. Calculating will be easy as there are special calculators for investors where necessary values can be input. You can do calculation here. Also, you can modify the account profitability and lifespan parameters. It's understandable that you'd prefer to enter the highest profitability value, but the highest profitability normally implies an aggressive and high-risky trading strategy, so you'd rather not. Enter an average profitability rate and a serious lifespan, and the figures you'll get will be closer to reality.
Good trades, friends!
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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.