Percentage allocation management module or PAMM is a good choice for people who are looking to explore forex trading. Especially for those who want to enjoy the profits of forex trading but have limited time and knowledge to bring that into reality. PAMM offers investors maximum risk diversion and could be referred to as a steady source of passive income.
What Is a PAMM Account?
It is a revolutionary methodology that involves trading in forex using pooled money from different investors in different proportions.
An investor under PAMM is given the liberty to allocate funds to different qualified traders, and money managers, of their choice who will invest the money to earn returns on their behalf. Forex brokers and money managers propose exciting investment schemes to individual investors to secure a tradable pool of money and trade in forex using that pool.
Here the role of the forex brokers becomes increasingly important because it’s the broker, who eventually will manage the pooled money.
Understanding the role of a forex broker:
Best forex brokers in Pakistan offer a platform that is secure and easily accessible where money managers and investors can interact. It is the forex broker’s platform where the money managers will propose different schemes to investors asking them to invest their money.
Forex brokers also provide the trading activities of money managers while keeping a check on all the regulations.
Facilities like account keeping, deposits, withdrawal, and other related activities are performed by the forex brokers on behalf of the investors who choose to invest using their platform.
Forex brokers also provide a transparent review system, feedback facility, and rating system for investors to rate money managers.
Highlight features of PAMM Forex Brokers:
PAMM accounts are available for all individual investors, there are no restrictions for individual investors. Moreover, individuals can open a PAMM account of their own, and act as a manager allowing others to invest with you!
Thus you have the facility of either investing with someone else’s PAMM account or can create a PAMM account of your own and offer your services as a money manager.
There is no upper limit on the number of investors who can invest in a PAMM account, any number of investors are allowed to invest in one account.
However there’s a limit of one money manager per account, thus there cannot be more than one manager for an account.
To keep the process entirely transparent and safe for investors, money managers are not allowed to transfer the pooled money to their accounts. He is only allowed to trade with the pooled money in the PAMM account.
For the manager the process is fairly simple, he doesn’t have to do anything special, he just has to trade using his account and the pooled funds will be proportionally added to his rate.
Money managers are allowed to set the minimum amount criteria for investors, they can even at their discretion decide not to accept any new investors.
The PAMM account brokers are getting popular, as the manager who pools money first has to risk his funds first, which is a great motivation for the investors because if someone’s risking his own money he’ll surely try to maximize returns. His trading decisions will not only shape the fate of the investors but his welfare is associated too.
Investors do not have much to do; they don’t have to participate actively in trading. They just have to save money and let the money managers handle it. This could be great for people looking to earn a passive income and cannot trade actively due to time limitations.
How to shortlist the forex broker for opening a PAMM account?
Experience always has an edge, thus look for the year in which the fund was founded. Because old brokers will have more experience than their newer counterparts. Newer brokers don’t have any reputation of their own thus investing with them might put your welfare in jeopardy.
The forex broker must have s license under its name because only then its operations will be considered legitimate. The license should be linked with the official website of the brokers.
Every country imposes a ton of regulations on brokers to safeguard the welfare of investors
These regulations range from tax reporting, audit of operations, legal compliance, etc.
Different forex brokers set different minimum deposit criteria for PAMM accounts, thus you’ll have to check every broker to find their minimum deposit requirements. For new investors, it’s important to not go all guns blazing and look to deposit only the minimum amount initially.