Trading in the forex market via managed accounts is a wonderful way for beginners and expert traders to make money. MAM and PAMM remain one of the most popular types of managed accounts, and they are an excellent choice for traders who want to consider trading with a managed account. Traders need to remember that their profits and losses are distributed proportionally in managed accounts.
In MAM, fund managers execute and place trades. Investors follow the fund managers. MAM is automated, and investors can diversify their portfolio by choosing to trade by following multiple fund managers.
PAMM benefits those who want to trade with a low capital investment. In PAMM, investors can diversify their portfolios by following multiple PAMM managers. Like MAM, PAMM is also automated.
MAM vs PAMM
PAMM and MAM accounts are both types of investment accounts that allow investors to pool their money together and have a professional money manager invest it on their behalf. The key difference between the two lies in how money is managed.
PAMM accounts, which stands for Percentage Allocation Management Module, work by having the money manager pool all of the investors’ money together into one account and then allocate a percentage of the account to each investor based on their initial investment. This means that each investor’s share of the account grows or shrinks in proportion to the overall performance of the account.
MAM accounts, which stands for Multi-Account Manager, work differently. Instead of pooling all of the investors’ money into one account, the money manager creates a separate sub-account for each investor. The money manager trades on all these sub-accounts simultaneously, using the same strategy and parameters.
As with all financial trading account types, PAMM and MAM, too, are risky. The expertise and profitability are not a guarantee of your profits in trading. Plus, any mistake or error on the manager’s side may result in losses to the investors. Investors become dependent on fund managers for their profitability.
So here is the checklist. This checklist will help you distinguish the right brokers for your managed accounts from the ones that indicate big red flags.
- They must be active for at least two years in trading.
- Their customer support must be exemplary, with people always willing to help you in need. Ensure that you get support via chat and phone. Email support may also be provided.
- Ensure that your broker is regulated.
- The withdrawals and deposits must be accessible. They shouldn’t take more than three days.
- Check whether the brokerage firm is in multiple countries worldwide.
- Check the regulatory status of the brokerage. It must be active.
- They must be able to make you gain exposure to other world markets.
- Check out the minimum deposit fees. It must be competitive and should be, at most, what seems logical.
- Your broker should provide various resources to learn to trade via PAMM and MAM. Plus, they must provide you with free risk management and analysis tools.
So, you learned how PAMM differs from a MAM account and how you can take advantage of both to achieve your trading goals quickly. It is not easy to achieve such goals without understanding what they are and how they function. Thankfully, with a simple guide like this, you can understand the market better and succeed in your trading endeavors.