PAMM ACCOUNT (Percent Allocation / assets Management Module ) is a multi account that consists of several investor accounts managed by a manager of a Pamm account. The main goal of this account is a proportionate distribution of losses and gains between all accounts. The broker is also a warrantor for distribution of gains between a manager and investors at the End of the trading interval.
The main point of the PAMM-system`s work is that trader has an opportunity to accept investments from other traders or to invest his/her own funds in account of another trader by means of having some part in it. In this way investors use the opportunities of PAMM-system for the purpose of profit earning from the deals settled by the managing traders.
All investments and transfers in the framework of PAMM-system are controlled by Forex Broker Company au-tomatically, this guarantees to all its participants the security, transparency and consideration of all operations inside the system.
Basically, PAMM-account is a form of trust management of the traders` collective assets, where the Broker Company realizes the shares` calculation, which provides the equal rights to all traders and allows to separate at any moment the part of total assets, which belongs to one or another trader. At the end of trading period the profit, gained at the PAMM-account, is apportioned between all participants (investors) of PAMM-account, and the Managing Trader receives the reward specified in the contract, which can be represented in percentage terms from the total profit for the trading period.
Understanding Forex PAMM
In order for you to understand the usage of forex PAMM you can visualize a scenario in which the master trader engages in a trade and all the accounts managed from the actual master follow the same trades all with one click.
Even more simple said the manager will not trade each account separately but will make one trading decision which will affect all following account at once and will allocate profits or losses to each account based on the funds traded in each trade execution.
Through forex PAMM managed account holders have the opportunity to monitor their account and moreover monitor trades executed by the master account holder which in reality affect interconnected accounts in real time. In this way the managed account holder may wish to interrupt the continuation of the agreement by revoking the power of attorney granted to the master trader at any given time.
Examples of how PAMM Works
Trader’s activity results (trades, profit and loss) are allocated between managed accounts according to the ratio as explained above. In this example we will assume that there are 3 managed accounts under one trader’s management:
Lets assume that there are 3 managed accounts under trader’s management:
- USD account with deposit of $ 100.000 and ratio 9,3%;
- EUR account with deposit of ? 400.000 and ratio 49,5%;
- GBP account with deposit of £ 300.000 and ratio 41,2%;
Depending on funded amounts different ratios are applied for managed account (for ratio calculation all amounts are converted in USD equivalent based on market rate).
In case if, for example, Trader/Money Manager decides to BUY 10 mio EURUSD, PAMM allocates the order between managed accounts according to its ratio. Each managed account has its own part of position and corresponding Profit & Loss. In current example first managed account will get position LONG 930.000 EUR/USD, second - LONG 4.950.000 EUR/USD and third – LONG 4.120.000 EUR/USD. Resulting profit & loss will be automatically calculated for each account depending on market prices. .
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From many source, edit by forex2020
Posted by Ekurnia
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