How does a PAMM Account work?Percentage Allocation Money Management or PAMM for short, is a form of pooled money forex trading.
An investor (or anyone wanting to make an ROI) allocates his or her funds in their desired proportion to the money managers PAMM account for trading. The trader/manager may manage multiple forex trading accounts using their own capital and such pooled capital from a few, or many investors, with an aim to generate greater profits, such profits or losses are split amongst the investors, based on the percentage of the amount invested in the account.
Participants: Broker/Brokerage Firm/Manager Trader/Investor
The process of investing within the PAMM system involves funds being transferred from an investor account to an account of the managing trader, which is closely monitored by a broker. After that, the investor becomes the owner of a share of the managing traders account proportionately to the invested amount. To better explain this, here’s a real life example of what would typically happen…
The investors (say, Mark, Jill, Scott, and Sarah) are interested in profiting from Forex trading, but they’re all busy at work and either doesn’t have time to devote to managing their own accounts or donít have sufficient knowledge to trade Forex.
So the professional money manager (Tony) is sought after. Tony is a Master Forex trader and one who has many years trading other people’s capital. The forex broker assigned Tony, the money manager for Mark, Jill, Scott, and Sarah. The four of them also sign-up with Limited Power of Attorney (LPOA). The basis of the signed agreement is that the investors agree to take the risk for the Forex trades, by giving their capital to Tony who will use the pooled money to trade Forex per his trading style and strategy. It also states how much money (or percentage) the manager will charge for offering this service.Jill = $4,560 / $16,400 = 27.80%
Scott = $3,420 / $16,400 = 20.85%
Sarah = $5,000 / $16,400 = 30.48%
So, once the trading time-frame is over and the Trading Manager receives his or her fee from the profit, the remaining profits are to be disbursed based on the percentage of the investor’s initial contribution from above.
The same is true if there is a loss once the trading time-frame expires, the losses would be shared according to the percentage of money initially deposited into the PAMM account.
If the trading manager deposits his or her own funds into the PAMM account with the investors, thus increasing the overall balance of the account, the trading manager would receive a profit share based on the percentage of his or her contribution. The same would also be true if there was a loss.
The Role of The Broker
To facilitate the account keeping, deposits, withdrawal, and related activities.
Provide a secure, reliable platform that allows money managers and investors to interact.
Facilitate the trading activities of money managers within the realms of allowed regulations.
Allow transparent review, feedback, rating, and related mechanisms for investors and money managers to select and interact with each other.
Things to Keep In Mind About The Managers
The Managers have access to the money only in their pool. They cannot pull money from investors trading accounts*. For example, Sarah may have a total of $11,000 in his Forex trading account, but since she has allocated only $5,000 to Tony, Tony cannot trade beyond that $5,000.
He can accept or deny new investors as he wishes.
He can also set a minimum and a maximum amount criteria for investors.
Things to Keep In Mind About Being an Investor
Usually, the investors have no choice of Forex trading assets, except for those offered by the money manager.
They carry the risk of losing their capital due to trading activities of money managers, but also enjoy the potential of returns if the manager performs well.
PAMM offers its investors great returns!
As an entrepreneur, Sky Powers has successfully built and run businesses since the 80’s. himself trading forex for own personal portfolio since 2012.
Sky’s experience as a business professional over the 30+ years has led him to realize that success as a trader is more than just technical capabilities and analysis to execute entries and exits. Rather, learning how to trade for a living means learning how to trade as a business – with a business plan and disciplined business approach for earning profits.
In 2012, Sky founded Sky Powers Management Group (www.SkyPowersFX.eu) and is now offering his expertise in managing client’s Investment Portfolio’s.
“Please note: Forex, has large potential rewards, but also large potential risk.you must be aware of the risks and be willing to accept them in order to invest in the markets. Don’t trade with money you can’t afford to lose. This website and the products, services, and information contained herein is not a solicitation. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results.”