An A to Z of PAMM managers' ranking
What is PAMM accounts ranking?
Any PAMM service at any brokerage company goes with the so-called PAMM accounts ranking. Interface designs may vary, but the essence remains the same: investors need the ranking to invest adequately. No one would be happy to entrust their savings to every Tom, Dick, and Harry. So, the ranking shows the competence and efficiency of managers and helps investors make the right choice. Conjure up a list of PAMM account managers. Clicking on any name, you will learn how experienced the trader is, how long he/she has been trading, what the history of his/her account is and which mistakes and victories he/she has registered. The above mentioned factors should be interpreted correctly, or the ranking won't be useful at all. That's why we are going to examine each of the factors in detail.
Age of a PAMM account
The period of a manager's work is counted from the moment of opening a PAMM account. This criterion is also called "the age of an account". What do we need it for? Being able to assess the age of an account helps an investor to have a broader idea about a manager’s work and exclude results based on pure luck.
So, we can filter the list by traders' experience. The age of at least 6 months can be regarded as serious. A trader's 6-month trading history provides rich material for analysis. However, remember that pro traders often open a few PAMM accounts. So, an account may be a few months old, but in fact, its holder may have other successful PAMM accounts and be quite experienced. So, pay attention to managers' old accounts!
If you want to know a PAMM manager’s least successful result, pay attention to the maximum drawdown factor. It expresses a manager's highest loss in %. It would be hard to give adequate advice regarding this matter, because a serious drawdown of over 50% does not mean a trader is bad. However, cautious investors should not choose accounts whose drawdown is over 40%.
The factor of profitability shows how profitable it would be to invest in a PAMM account. There are still some pitfalls here too. As we know, nothing ventured, nothing gained. It means high profitability results are usually associated with taking risks. But in their turn, risks imply a higher number and volume of drawdowns. What shall we do then? A perfect monthly profitability to monthly drawdown ratio would be one to three. For example, with a monthly profitability of 10%, a monthly drawdown should not exceed 30%.
Manager's personal investment
Not only investors’ money is kept in a PAMM account. The manager also has his/her own money in the PAMM account, whose amount is reflected by the Manager Capital Volume factor. This information will be handy for assessing the reliability of a manager. A manager will be more careful and efficient if he/she has invested a significant sum of money too. When trading, he/she remembers that his/her own money is at stake as well. So, consider investing in managers whose personal investment in the account is no less than 10% of the overall capital. Higher amounts will be rare since managers wouldn't share their profits with you if they could increase their trading volumes on their own.
Number of investors and volume of investments
Once you have assessed how much a manager can stake, you can assess how many investors are ready to entrust their funds to this manager. The logic is simple: the higher percentage of investment is, the more confidence in the trader other investors have.
Filtering the PAMM managers' ranking, you can limit the large list to a couple of names. When choosing the criteria, you can follow the order set in this article. The factors are enumerated in the order of importance. Now you know how our PAMM ranking can help you assess a manager without making a mistake!