PAMM Trading
Percentage Allocation Management Module (PAMM) trading platforms have grown in popularity in recent years. Nowadays, PAMM trading is seen as one of the less risky ways to earn passive income online. In this guide to PAMM trading, we explain how different systems works plus the pros and cons for both investors and fund managers.
PAMM Brokers
#1 - AvaTrade
Why We Chose AvaTrade
AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.
"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Crypto, Spread Betting
- Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
- Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail) 1:400 (Pro)
Pros
- The broker’s unique risk management tool, AvaProtect, protects against losses up to $1 million and is easy to activate in the platform
- WebTrader is well-suited to beginners and features a strong suite of technical analysis tools and market research for day traders
- Day traders can access stable spreads and zero commissions with no hidden fees
Cons
- It’s a shame that there are no rebate schemes for serious traders looking for additional perks - CMC Markets would be a better choice here
- There is no ECN account with raw spreads
- There’s an above-average $50 inactivity fee after three months, though this won't impact active day traders
#2 - Pepperstone
Why We Chose Pepperstone
Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.
"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."
- DayTrading Review Team
- Instruments: CFDs, Forex, Currency Indices, Stocks, Indices, Commodities, ETFs, Crypto, Spread Betting
- Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
- Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade
- Minimum Deposit: $0
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (Retail), 1:500 (Pro)
Pros
- Pepperstone boasts impressive execution speeds, averaging around 30ms, facilitating fast order processing and execution that’s ideal for day trading.
- Now offering spread betting through TradingView, Pepperstone provides a seamless, tax-efficient trading experience with advanced analysis tools.
- There’s support for a range of industry-leading charting platforms including MT4, MT5, TradingView, and cTrader, catering to various short-term trading styles, including algo trading.
Cons
- Despite enhancements to its range of markets, crypto offerings are relatively limited compared to other brokers such as eToro, with no option to invest in real coins.
- Pepperstone’s demo accounts are active for only 30 days, which may not be not long enough to familiarize yourself with the different platforms and test trading strategies.
- Pepperstone does not support cTrader Copy, a popular copy trading feature built into the excellent cTrader platform and available at alternatives like IC Markets.
#3 - IC Markets
Why We Chose IC Markets
IC Markets is a globally recognized forex and CFD broker known for its excellent pricing, comprehensive range of trading instruments, and premium trading technology. Founded in 2007 and headquartered in Australia, the brokerage is regulated by the ASIC, CySEC and FSA, and has attracted more than 180,000 clients from over 200 countries.
"IC Markets offers superior pricing, exceptionally fast execution and seamless deposits. The introduction of advanced charting platforms, notably TradingView, and the Raw Trader Plus account, ensures it remains a top choice for intermediate to advanced day traders."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, Indices, Commodities, Bonds, Futures, Crypto
- Regulator: ASIC, CySEC, FSA
- Platforms: MT4, MT5, cTrader, TradingView, TradingCentral, DupliTrade
- Minimum Deposit: $200
- Minimum Trade: 0.01 Lots
- Leverage: 1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global)
Pros
- With ultra-fast execution speeds averaging 35 milliseconds and deep liquidity, IC Markets provides an optimal trading environment for scalpers, hedgers, and algorithmic traders.
- IC Markets offers among the tightest spreads in the industry, with 0.0-pip spreads on major currency pairs, making it especially cost-effective for day traders.
- IC Markets offers fast and dependable 24/5 support based on firsthand experience, particularly when it comes to accounts and funding issues.
Cons
- Despite four industry-leading third-party platforms, there is no proprietary software or trading app built with new traders in mind.
- There are fees for certain withdrawal methods, including a $20 wire charge, which can eat into profits, especially for frequent withdrawals.
- While IC Markets offers a selection of metals and cryptos for trading via CFDs, the range is not as extensive as brokers like eToro, limiting opportunities for traders interested in these asset classes.
#4 - InstaForex
Why We Chose InstaForex
InstaForex is a forex and CFD broker founded in 2007. The broker offers diverse market coverage to over 7 million clients, spanning traditional assets like currencies and shares, as well as other interesting opportunities such as IPOs. Traders can also access copy trading services, PAMM accounts and investment opportunities. InstaForex is regulated by the BVI FSC.
"InstaForex maintains its position as a top forex broker, with more currency products than most rivals. The tight spreads and low minimum deposits make it accessible to all experience levels, especially those familiar with the MT4 and MT5 platforms."
- DayTrading Review Team
- Instruments: CFDs, Forex, Stocks, ETFs, Cryptos, Futures, Commodities
- Platforms: MT4, MT5
Pros
- The broker is accessible for beginners, with low minimum deposits, Cent accounts (for global clients) and zero-commission trading available
- There’s a decent range of free and fast payment methods including local bank transfers, bank cards, e-wallets and cryptos
- InstaForex delivers a superb day trading environment, with the powerful MT4 and MT5 platforms offering dozens of technical analysis tools, automation capabilities and multiple order types
Cons
- The broker’s global branch offers weaker regulation via the offshore jurisdiction of the British Virgin Islands, which means non-EU traders will receive limited safeguards
- Market coverage and account conditions vary significantly between the global and EU entities - for example, only 300+ instruments are available for global clients, whilst European traders can access 2500+
- The broker’s website and client cabinet feel outdated and difficult to navigate for newcomers
#5 - LQDFX
Why We Chose LQDFX
LQDFX is a straight-through processing (STP) broker based in the Marshall Islands. The offshore trading firm offers competitive spreads from 0.0 pips, free deposits, 24/5 support and access to the hugely popular MetaTrader 4 platform. LQDFX also runs a competitive bonus program for short-term traders.
"LQDFX is best for active day traders looking for ultra-tight spreads, low fees and high leverage up to 1:1000. Forex traders will particularly appreciate the strong range of 70+ currency pairs with minimum deposits starting from $20."
- DayTrading Review Team
- Instruments: Forex, CFDs, Stocks, Indices, Commodities, Crypto
- Platforms: MT4
- Minimum Deposit: $20
- Minimum Trade: 0.01 Lots
- Leverage: 1:1000
Pros
- The $20 minimum initial deposit is accessible for beginners, and the Micro account will serve those looking to trade in smaller volumes
- The broker offers the industry favorite MT4 platform and mobile app, with 30 technical indicators for chart analysis
- There are multiple STP account types with fast execution speeds, plus an Islamic swap-free option and PAMM accounts
Cons
- It's a shame that there's no copy trading platform for beginners or experienced strategy providers
- There are no additional charting platforms available, such as MT5 or a proprietary solution
- Market research tools and educational resources are very limited compared to top brands like IG
How PAMM Trading Works
PAMM stands for Percentage Allocation Management Module or Percentage Allocation Money Management. PAMM trading is a form of pooled capital managed trading whereby investors—also called followers—allocate their money to a qualified trader or money manager in desired proportions. These traders can manage several trading accounts at one time using their own capital and the pooled money to generate profits.
Managers distribute the portion of trades according to the percentage allocation. This percentage is defined by the trader in the manager offer—an agreement regulating the relationship between an investor and the PAMM trader managing funds.
Money managers are usually rewarded by charging management fees—taken from investor balances every month—and incentive fees which depend on the profits obtained by the fund manager.
PAMM trading is an attractive option for inexperienced investors who want to benefit from forex or stock trading, for example, but do not have sufficient time or knowledge to commit to the process.
PAMM Trading Example
Let’s say a trader deposits $2,000 and investors contribute their own money to the trader’s PAMM account too. Investor A adds $5,000 and Investor B adds $3,000. The total of the pooled pot is $10,000. The manager keeps trading through the PAMM account using the pooled funds of $10,000.
If the trader makes a 100% return ($10,000), they would take away their $2,000 investment plus $2,000 profit. Investor A would be able to withdraw their $5,000 investment plus $5,000 in profit and Investor B would take their $3,000 plus $3,000 in profit.
However, say the fund manager’s incentive remuneration was set at 25% of the total return, the trader would also benefit from Investors A and B’s profit. The trader would earn $2,500 from Investor A and $1,500 from Investor B, adding a total of $4,000 to the trader’s overall profit.
Setting Up
The trader or money manager opens a PAMM account and meets the minimum deposit requirement, as specified by the broker. The trader must define the terms in the PAMM manager offer such as the minimum investment deposit, time period, and the premium as a percentage of the profit gained.
An investor can analyse a trader’s results through a system that monitors PAMM accounts held with a brokerage. A user can then decide whether to invest with that specific trader or not. New clients can get up and running in a few minutes at top PAMM trading platforms.
PAMM Vs MAM Vs LAMM
MAM (Multi-Account Manager) solutions are a derivative of the PAMM system. MAM accounts allow traders to use the percentage allocation method but provide more flexibility to allocate the trades and adjust the risk of each sub-account based on the clients’ risk profiles. MAM accounts combine individual trader capital into a large pool of managed funds. However, if you are connected to the master account in the PAMM system, you will achieve the same results in your investor account which is not guaranteed when MAM trading.
Many brokers offer both PAMM and MAMM trading but MAM master accounts are not typically visible on leaderboards unlike with PAMM services.
LAMM (Lot Allocation Management Module) is considered to be the predecessor of PAMM. It does not function according to the size of each investor account. The investor chooses the number of lots that can be traded in the market and the profits (or losses) are determined based on the multiples of lots invested. LAMM trading is best suited to those with more capital.
Benefits Of PAMM Trading
There are several advantages of PAMM trading for both investors and traders:
- No experience needed – the trader is the one making the decisions but you still reap the rewards of their hard work. Investors can replicate one or more successful trading strategies in their PAMM terminal.
- Access to more capital – PAMM managers gain access to more capital than they would if they were just trading with their own funds. Unsurprisingly, pooled funds often generate more profits than smaller investments, especially in forex trading due to smaller profit margins.
- Hands-off approach – PAMM trading is a good option for investors who don’t have the time to commit to the financial markets.
- Easy to invest – investors can deposit funds into their account once and then allocate those funds across several PAMM trading solutions.
- Joint risk – PAMM traders are risking their own capital as well as their investors’ money. More experienced investors avoid managers that only have a small amount of their own capital on the line.
- PAMM brokers act as guarantors – the obligations made between money managers and investors are guaranteed by the broker and the master trader cannot disappear with investors’ money. Although capital is managed by the trader, they cannot withdraw it.
- Account history – PAMM brokers usually provide a breakdown of a master trader’s track record to help clients find a reliable trader.
- Rewards – profitable traders can receive profits from the management of both their own capital and investors’ funds.
Drawbacks Of PAMM Trading
As with most types of investing, there are some drawbacks to PAMM trading:
- Loss possibility – if a broker doesn’t allow an investor to set a maximum loss limit, the client’s loss can hit 100%, meaning a total drawdown.
- Less learning – unlike with copy trading, investors cannot study a PAMM trader’s investing style, making it harder to develop your own skills.
- Less visible – investors may not know who is managing their capital. It could be either a seasoned trader or a beginner using profitable but seriously risky strategies. It could also be a sophisticated bot developed to partially or fully wipe out investors’ funds after several profitable time periods.
How To Start PAMM Trading
Choosing A Broker
- Regulation – look for PAMM trading platforms that are properly regulated and licensed. We do not recommend trading with unregulated providers.
- Fees – make sure your broker is transparent about performance and fees, including having the full flexibility to deposit and withdraw your funds as needed. Also, customer deposits should be held in your own trading account so that you’re the only person able to make payments.
- Statistics – having access to information and important statistics is vital. You want to choose a PAMM trading provider that offers a service that suits your risk appetite, profile, and financial aspirations. Key information includes the type of PAMM trading system, when it was created, the currency, how many followers/investors the trader has, average win/loss ratio, drawdown, and more.
Choosing A Manager
- Experience – looking at the PAMM trader’s track record will help ensure you find an experienced and established investor. By looking at their history, you can conduct a deeper analysis of their financial results. Ideally, PAMM trading services with 3 or 4 years’ experience are best.
- Maximum drawdown – being able to set a maximum drawdown will decrease your risk exposure. For beginners, we recommend choosing accounts with the maximum drawdown level equal to no more than 40%.
- Profitability – select a PAMM trading provider that balances profitability with your investment style. Profitability is closely linked to your maximum drawdown limit. Accounts where the ratio of maximum drawdown to profitability is no higher than 1:3 tend to perform better.
- Consistency – how consistent is a fund manager’s results? Consistent returns are arguably better than unpredictable peaks and troughs with regular success making it easier to plan.
- Fund manager equity – investors can view PAMM managers’ equity via the broker. Sophisticated investors tend to avoid using PAMM traders who only have a small amount of their own funds on the line. The higher the equity, the greater their personal risk and arguably the more motivation to get it right.
- Popularity – a trader that already manages funds for several investors is a good sign. The best providers are transparent about their current portfolio of clients.
Final Word On PAMM Trading
PAMM trading technology allows investors with a limited understanding of market trends to profit from others’ expert knowledge. But while there are multiple benefits of PAMM trading, beginners may struggle to build their own skills. As a result, it’s important to weigh up your options, including how much time you have, your objectives and your risk appetite. See our list of the best PAMM trading brokers to get started today.
FAQs
What Is PAMM Trading?
With PAMM trading, your money is handled by a fund manager who places trades on your behalf with the aim of making a profit. Multiple investors pool their funds to maximise returns and profits are distributed equally according to the amount each investor put forward.
Should I Start PAMM Trading?
PAMM trading is growing in popularity. For beginners, in particular, it offers a means of generating income from the financial markets without a serious time commitment. With that said, profits are not guaranteed and you can lose money, especially if you don’t choose a master trader carefully.
Is PAMM Trading Safe?
PAMM trading is offered by many regulated brokers that offer a secure investing environment. However, PAMM trading is not always profitable, and to some extent, you are at the mercy of the fund manager.
Which Brokers Offer PAMM Trading?
Several brokers offer PAMM trading, including Alpari, FXOpen, FXPrimus, and ThinkMarkets. See our list of the best PAMM trading brokers, including reviews, to get started.
What Is The Difference Between PAMM, MAM, And LAMM Trading?
PAMM, MAM, and LAMM are all money management systems. MAM accounts allow managers to assign higher leverage to sub-accounts and are attractive to investors with a high-risk appetite. LAMM is an early iteration of PAMM where a trader is allowed to allocate different lots to individual investor accounts.