A relatively new type of relationship in the forex market, which, with the right approach, can bring a certain, if not the most significant, profit. At its core, PAMM accounts can be compared with investment funds. Let us consider in more detail the principle of investing in this type of trade.
How the PAMM account works. An investor who wants to make a profit, transfers in trust the funds to the trader, who is in charge of managing the account. At the moment, the offer is a PAMM-account, which specifies the conditions and terms of trust management. Often, the offer stipulates the distribution of profits at the end of the term of the offer, while the trader has the right to use the profit in the interim period (from 1 to 4 weeks) for further trades. However, at the request of the investor can withdraw part of the funds and at the end of each trading period.
PAMM-account yield. Do not rely on the fabulous profits from this type of investment. Unlike mutual funds or bank deposits, this is a high-risk way to invest money. No one is immune from the dishonesty of the managing trader, and simply getting a loss because of force majeure also can not be ignored.
Broker. How fair and transparently the trader observes the conditions of the offer is monitored by an independent third party – the broker, who receives his commission from the profit received. If we calculate the approximate minimum expenses for servicing a PAMM-account, it turns out that the amount of the monthly commission to the broker, the payment of taxes on profits to the state budget and technical expenses are impressive. So, before investing, you must first calculate what kind of income will suit you and whether it will cover costs.
This implies the following thesis: there is a minimum entry threshold for this type of trading and it is rather big. If you do not like to take risks, then a small percentage of income strategy will be very helpful, but then the amount of investment should be proportionately larger.
The essence of the work is that it represents a special Internet service for trades, in which traders and clients are registered. That is, working at the broker’s software platform, a trader cannot simply withdraw money and hide from the client. This is the control function of the broker as an intermediary in conducting transactions.
To summarize: there are three main participants in trading through PAMM accounts. The risks of losing the funds invested by the client directly depend on the professional qualities of the trader, while the broker only performs the function of monitoring and security of the money invested. It is up to you to try whether you make deals on Forex yourself or trust a trader. Trust your knowledge, your instincts, and everything will work out for you!