PAMM Forex Brokers
...NDD, ECN, STP
FCA (United Kingdom) license №509956, CySEC (Cyprus) license №078/07, CNMV (Spain) license no. SIA-F184
Open account
Demo accounts (with a time limit), Standard Accounts, Segregated accounts
ASIC (Australia) license №No.406684, CBI (Ireland) license №No.C53877, FSA (Japan) license №No.1662, FFAJ (Japan) license №No.1574, ISA (Israel) license №514666577, FSCA (South Africa) №45984, B.V.I. FSC № SIBA/L/13/1049
Open account
...MetaTrader 4, MetaTrader 5, Meta Trader 4 Mobile, MetaTrader 5 Mobile, MetaTrader 4 MultiTerminal
Open accountUnlimited Demo Accounts, Standard Accounts, ECN accounts, Cent accounts, VIP accounts
IFSC (Belize) license №IFSC/60/301/TS/17 NAFD (Russia) FSA (Saint Vincent and the Grenadines) license №20389 IBC 2012 AFD (Russia)
Open accountMetaTrader 4, MetaTrader 5, Meta Trader 4 Mobile, MetaTrader 5 Mobile, MetaTrader 4 MultiTerminal, Web Tarder, TickTrader
Open accountUnlimited Demo Accounts, Standard Accounts, Cent accounts, Swap free accounts, Segregated accounts
BVI FSC, License Number SIBA/L/14/1082, FSC Saint Vincent, Reg. Number IBC22945, Saint Vincent, IBC24321
Open accountMetaTrader 4, Meta Trader 4 Mobile, Forex4you Webtraer, Forex4you Desktop
Open accountDemo accounts (with a time limit), Standard Accounts, ECN accounts, STP accounts, Cent accounts, Swap free accounts, Segregated accounts
Financial Services Commission (FSC) BVI, license registration number: SIBA/L/13/1063
Open account
Unlimited Demo Accounts, ECN accounts
МТ4 iPhone, МТ4 Android, МТ4 Windows Mobile, WebTrader, MetaTrader 4 (MT4), MetaTrader 5 (MT5), МТ5 iPhone, МТ5 Android, МТ5 Windows Mobile
Open accountUnlimited Demo accounts, Standard accounts, ECN accounts, Cent accounts, Free swap accounts, Micro accounts
МТ4 iPhone, МТ4 Android, МТ4 Windows Mobile, MetaTrader 4 (MT4), МТ5 iPhone, МТ5 Android, МТ5 Windows Mobile, MetaTrader 5 (MT5)
Open accountUnlimited Demo Accounts, ECN accounts, STP accounts, Micro accounts
Demo accounts (with a time limit), Standard Accounts, Segregated accounts
A PAMM forex broker sponsors a special PAMM account that is essentially a forex investment pool. PAMM is an acronym for “pooled allocation management module”.
The pool is managed by the PAMM money manager who makes investment decisions and orders the forex trades on behalf of the pool investor/traders. The PAMM manager is compensated for his management services with an equity share of the pool profits and usually invests his own capital in the pool along with the other investors/traders. Hence he has something at stake.
Forex trading can be challenging but financially lucrative. It can also be risky. It is certainly complex. Brokers set up special forex accounts designed to accommodate the interests of different investor communities. Forex cent accounts are set up for small traders with limited experience and resources. Islamic forex accounts are set up to serve the needs of Muslims who are forbidden by Sharia from investing in any forex trade that involves interest or “swaps”.
Forex accounts are set up for PAMMS to serve two trader interests. First, it allows small traders to participate in larger and numerous trades spreading their risk (a la mutual funds). Second, a professional relieves the novice trader of the task of learning the ins and outs of forex trading. A good PAMM manager (i) is experienced and knowledgeable, (ii) has his well-developed trading strategies, (iii) has the necessary facilities, and (iv) can monitor and respond quickly to changing market dynamics.
Typical PAMM Contract
PAMM pools are established by contract (PAMM Agreement) which usually is an addendum to a trader’s agreement with a forex broker. The typical combination of the trader/broker contract and the PAMM arrangement consists of three parties. A forex broker sets up a forex account for the PAMM. A PAMM manager controls and manages the account. Investors/traders participate in a pool of traders contributing capital to the account. The PAMM manager can and usually does contribute capital as well.
The PAMM manager makes all forex trade decisions on behalf of the trader/investors. The PAMM manager usually conducts its forex trades through the sponsoring forex broker.
The profit and loss on the account are allocated among the investors in proportion to their capital contributions. That allocation is made after the PAMM manager is paid a management fee in the form of a profit percentage off the top.
Example: Suppose 10 traders have trader agreements and separate accounts with a forex Broker. Their Broker establishes a PAMM capital account. X, a PAMM manager, is engaged to manage the account, including selecting and ordering forex trades. The PAMM manager is periodically paid a management fee equal to, say, 10% of the forex account’s profit.
Four of the traders, A, B, C, and D, choose to invest part but not all of their respective brokerage accounts in the PAMM capital account. They will sign a PAMM Agreement as an addendum to their trader agreement.
Assume a total initial capital of $15,000 is contributed: A -$5,000 (33%); B – $4,000 (27%); C -$3,000 (20%); and D – $2,000 (13%). X contributes $1,000 (7%).
Net profit and loss, after X’s management fee, are allocated in proportion to the traders’ respective capital contributions. Suppose the PAMM has a gross profit of $3,600. The 10% management fee would be charged against the gross profit (i.e. $360). Then the net profit of $3,240 would be allocated among the participating traders in proportion to their respective capital contributions.
Suppose, instead, the PAMM incurs a $3,600 loss. X would receive no management fee. The $3,600 loss would be allocated among and charged to their respective capital accounts in proportion to their capital contributions
Selecting a PAMM Broker
The traders/participants choose the PAMM manager. Brokerage firms offer or recommend the services of PAMM managers. They present much information to assist an informed selection. They furnish CVs and disclose detailed qualifications, past performances including returns on investment, the amount of money managed, etc.
There are also online independent rating services. Many very reliable rating services are listed on Google. A good independent reviewer is not a trader, broker, or money manager. They should feature a forex broker list, forex broker reviews, learning resources, and an informative blog. Investors/traders should consult more than one list of reviewed PAMM brokers and managers.
Investors must understand that there is a cost for the advantages of a PAMM. The investor relinquishes control to the money manager for the term of the contract. Therefore, an investor/trader should select only reputable honest forex brokers and PAMM managers.
The good news is that the term of the contract is not perpetual. At the end of any allocation period, the participant can withdraw altogether, or take his profit and leave his original contribution, or let it all ride. Also, the money manager controls only the investor’s contribution to the pool. The money manager has no access to the participant’s other trading accounts, including those maintained with the sponsoring broker.
Ultimately, investors are encouraged to undertake serious due diligence when choosing a forex broker and hence the PAMM manager. For starters, they should only engage PAMM brokers and managers regulated by strong, transparent, and effective regulatory authorities.