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 - ForexChief

Why We Chose ForexChief

ForexChief is a foreign exchange and CFD broker, established in 2014. The company is based offshore and registered with the VFSC and FMA. Users can choose between a wide selection of accounts and base currencies, making ForexChief accessible to global traders. The brand also stands out for its no deposit bonus and fee rebates for high-volume traders.

"ForexChief continues to prove popular with investors looking to trade highly leveraged CFDs on the popular MetaTrader platforms. The broker's rebate scheme and investment accounts will particularly appeal to seasoned traders. However, the lack of top-tier regulatory oversight is a major drawback."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Metals, Commodities, Stocks, Indices
  • Regulator: VFSC
  • Platforms: MT4, MT5
  • Min. Deposit: $10
  • Min. Trade: 0.01 Lots
  • Leverage: 1:1000

Pros

  • Traders can access a copy trading solution via the MetaQuotes Signals service
  • The low minimum deposit of $10 will appeal to beginners, as well as the beginners’ guides in the Library
  • ForexChief offers STP/ECN execution with low spreads from 0.0 pips and low commission rates starting from $2.50 per side

Cons

  • The total range of 150+ assets is much lower than most competitors who typically offer hundreds
  • ForexChief is an offshore broker with weak regulatory oversight from the VFSC, so traders will receive limited safeguards
  • Fees and minimums are imposed on most withdrawal methods, including a €60 minimum for SWIFT bank transfers

#2 - Coinexx

Why We Chose Coinexx

Coinexx is an unregulated broker that provides leverage up to 1:500 on forex, commodities, indices and cryptocurrencies with deep liquidity, pure ECN spreads and negative balance protection. The broker uses crypto as base currencies and has low minimum deposit requirements of 0.001 BTC.

"Traders seeking highly leveraged CFDs with a broker that uses crypto as a base account currency will find a good match in Coinexx. The ECN model also offer tight spreads from 0 pips. On the downside, traders should note the weak regulatory oversight."

- DayTrading Review Team
  • Instruments: Forex, Commodities, Indices, Cryptocurrencies
  • Platforms: MT4, MT5
  • Min. Deposit: 0.001 BTC
  • Min. Trade: 0.01 Lots
  • Leverage: 1:500

Pros

  • Demo account available to prospective traders
  • Free VPS for active traders
  • 100% deposit bonus for new clients

Cons

  • No copy trading service for aspiring investors
  • No fiat account funding options - crypto only
  • No regulatory oversight reduces safety

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

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.

PAMM trading systems

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:

Drawbacks Of PAMM Trading

As with most types of investing, there are some drawbacks to PAMM trading:

How To Start PAMM Trading

Choosing A Broker

Choosing A Manager

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.