There are many ways to trade the forex markets. While some investors like to take a hands-on approach to hone their personal trading skills, others prefer pooled money forex trading such as percentage allocation money management – or PAMM.
PAMM accounts are ideal for those who don’t have the time or know-how to invest, bringing traders and investors together under mutually beneficial terms. This article will explain PAMM accounts in more detail and look at the selling points of 4xCube PAMM.
How do PAMM accounts work?
PAMM accounts are popular in the forex realm as they have potential benefits for both investors and money managers – but how do they work? Well the concept is simple.
Essentially, forex traders can decide to invest funds into the account of a professional trader. The trader managing the account then trades his own money as well as the pooled money from investors, with all receiving a percentage of the profits or losses into their accounts. As the money managers puts their own capital on the line, the consensus is they’ll work hard to read the market carefully and make well thought out trading decisions.
While forex traders involved in a pooled account can potentially benefit from the extensive knowledge of experienced money managers, professional traders can make money from their own investment while taking a profit percentage of the pooled account.
Of course, the more money pooled, the higher the returns could be. PAMM accounts work well for people at all stages of their trading journey, with novices often piggybacking off long-term forex traders. Money managers can also work with many different traders simultaneously.
Let’s paint a clearer picture
If the total pooled PAMM fund is $100,000, each investor will have their own share percentage depending on how much they’ve invested. The sum total of all shares always equals 100% or 1. Here’s a quick breakdown.
Money manager is trading with $10,000 – percentage allocation of 10%
Trader B gives $40,000 to be managed – percentage allocation is 40%
Trader C gives $50,000 to be managed – percentage allocation is 50%
If pooled funds make a profit, the money manager can take a pre-set percentage off that sum. The remaining profit is then allocated between parties (including the money manager), depending on each percentage they have in the total pool. So, you can see that the money manager has a clear incentive to make the account profitable. But, of course, forex activities always come with risk and profits aren’t guaranteed.
Selling points of 4xCube PAMM
When it comes to trading via a PAMM account, it’s important to choose a reputable forex broker that promotes the fair distribution of funds. 4xCube offers automated PAMM investing solutions with a multitude of benefits. For instance:
Trading fees and Performance fees are paid to the account manager daily
The distribution of profit and loss is equal and fair
The live performance of money managers can be shown to the 4xCube client database helping professional traders to attract investors interested in pooling funds
Power of Attorney (POA) is signed digitally making it easier for any investor to subscribe
Any mark-up on commission is allowed
PAMM accounts can be set up free of charge with no minimum trading deposit. This has appeal when you consider brokers typically request minimum $50K investment to provide a Multi-Account Manager (MAM) account.
Contact 4xCube today to find out more about PAMM accounts and pooled fund investments.