PAMM investing – a passive income at FOREX market
The FOREX market is considered one of the most profitable financial markets, but also one of the riskiest. Many investors are deterred from it, in addition to the high probability of losing a significant funds, lack of experience of currency trading. For those who want to invest, but may not itself actively trade help Trustees. In most countries it is the large funds, which is required to enter into long-term agreements. In Russia, due to the nature of legislation is most often, banks have to work with that many ordinary investors are not always convenient.
Different brokerage companies to attract investors who want to receive passive income in the FOREX market, come up with a variety of technologies. Company Alpari registered for this purpose trademark PAMM (Percent Allocation Management Module, PAMM management module percentage distribution), which are convenient legal mechanism of interaction of small private managers with investors.
How does the normal PAMM account
By and large, investing in PAMM can not be considered a transfer of assets in trust. The PAMM Manager is unable independently to use these funds, they don't even go to his disposal. The investor simply accepts automatically copy all current transactions, i.e. trade with him simultaneously. The value of each of these operations is strictly proportional to the set of the investor. Manager trades your money on their own, and only risks his own capital. The principal trades at their own risk, but repeats without exception the actions of the Manager.
Technology investment in the PAMM is fully automated, the broker conducts a transaction in accordance with the rules, even the reward Manager can not pick up. This achieves financial security parties, as the responsibility lies with the brokerage company.
It is believed that the PAMM technology helps to eliminate unnecessary risk, legkomyslennos actions of the Manager, who trades with his own money. In the event of an error he will surely lose. No other liability to the investors, he is not responsible.
The profitability of investment in the PAMM account
The profit that the investor can work with a PAMM account the main criterion of selection of control. An average annual return of the best managers reaches 80-100%, if the lifetime of the account more than 3 years.
Of course, in the rankings and shows amazing results 200% per month. But in another year, or another month on these accounts, you can see considerable loss. You need to understand that to achieve astronomical yields were used risky methods of trading, which reduce the probability of obtaining a stable result.
It should be remembered that long-term statistics of the yield of conventional traders says that profit more than 10% in a month, most likely, does not happen long. For managers of PAMM accounts this value should be lower, because of much lower risk they are obliged to provide to investors – we are talking about responsibility for other people's money. Therefore, the most reasonable is the choice of yield of 60-80% per annum.
Risks and drawdowns on the accounts
The overall risk of investment in the PAMM managers is primarily determined by their style of trading the more conservative trader selects the Trustee, the less likely full loss of Deposit. Absolute guarantees can not give one, but the level of past drawdowns on the accounts can serve as a specific signal that is to be expected in the future.
It is considered that the maximum relative loss account shall not exceed 10%, make investments attractive for most people. Thus it is necessary to adhere to strict rules that the maximum daily loss does not exceed 2-3%, as this corresponds to the acceptable rules of money management used by the Manager.
The investor must understand that no success in the past does not guarantee a stable income in the future. But the positive statistics for a long time significantly increases the likelihood that investments will not be unprofitable.
PAMM portfolio to reduce risk
Along with the traditional use of the technology of copying trades of one Manager who used to work with PAMM accounts, an interesting tool that makes sense to invest the PAMM portfolio. This is formed by managing an investment portfolio of several PAMM-sets, selected for their rates of return, risk and type of using trading strategies.
Diversification that can be achieved when working with PAMM portfolio, reduces overall yield, but allows you to virtually eliminate the risk of loss of Deposit. Typically, the portfolio Manager selects the PAMM-accounts, which use different currency pairs and time intervals. As a result, even at very large losses on one or more of them, it is possible to preserve the capital of clients and make a profit, which is much higher than normal interest rates.