So, what is a PAMM account?
Let's say you are eager to enter the forex market and decide to glance at the market to see if you are the next Oracle of Omaha. After a quick search, you click on a forex news site and start reading the pairs. EUR/USD is trading at 1.1300, the GBP/USD is trading a 1.3300, and the EUR/GBP pair is trading at 0.8500. That does not look right, or maybe it does. It is hard to tell when you are a beginner. Do you invest in one of the pairs? Is this the moment where arbitrage is a good strategy? What is that anyway? All these questions could take months or even years of training to be fully answered.
That is where PAMM comes to play. PAMM is an account where investors can pool their money and let a professional forex trader manage said capital on their behalf. The investors have full control of how much capital they want to allocate, as well as which trader they wish to use. Moreover, there are 3 critical participants in a PAMM account.
The Brokerage Firm is in charge of providing market access as well as providing potential investors with a plethora of traders to choose from a list of certified forex traders. Those in charge of handling the capital, the traders, are people accustomed to managing investor's wealth (e.g. mutual fund managers, hedge fund managers, etc). Lastly, investors are just people who want to make extra money in the forex market.
Now all of this sound good, but how can you make a profit out of it?
Pretty simple. All you need to do is talk to a trustworthy brokerage firm, check the track record of the traders they have available for a PAMM account, invest your money with the one you have found to maximize your original investment, sit back and watch how a professional makes your life easier.
One of the most significant advantages is that you will not have to worry about your trading strategy because that will be handled by a professional. Additionally, the profits an individual investor makes are correlated to the percentage of capital everyone contributes to said account. Someone who contributed 30% of the total money in the account, will be awarded 30% of the profits made at the end of the month. So at no point will other investors take away your earnings from your capital invested. The only loses you will see, will be related to the performance of the trader in charge of the account.
So next time you are thinking about a PAMM account, stop thinking and get one. There is no more straightforward way to make money in the forex market than that.
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