What are the Options if You Want to Trade Forex Using a Managed Account
In the world of Forex trading there are a number of options to choose from. One of those options is to open a managed account with a Forex broker. And if it wasn’t for the fact there are a few different money-managing systems available, the decision would be simple. And it would only take a few words to explain what is involved in opening a managed account.
Nothing is ever as simple as it could be, especially in today’s modern world. And managed Forex accounts are no different. PAMM, LAMM, and MAM may sound similar but there are some important differences it would be helpful to understand, if you want to make an informed choice.
MAM and PAMM accounts give fund managers the opportunity to manage multiple accounts from one single one, without the need for an investment fund. Managed Forex accounts are those in which a fully segregated account is individually owned by one investor at a brokerage firm. However, the account is managed by a professional trader or money maker who makes the trades on the account holder’s behalf. The account holder keeps full control, but allows the money manager trade only access.
Three different systems and the way they perform
When it comes to Forex trading there are brokers with MAM, PAMM, and LAMM. Sounds a bit confusing, so let’s look at the differences.
LAMM – Lot allocation management module
In this type of trading system, a trader is allowed to allocate different trade lots to individual investor’s accounts. The trader has the flexibility to take advantage of different leverages for different types of investors.
MAM – Multi-account manager
This type of account is a combination of LAMM and PAMM, and gives greater flexibility to the trader who is managing the investors accounts.
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PAMM – Percent allocation management module
With this type of system, gains, losses and fees are distributed on an equal percentage basis. All accounts obtain the same percentage returns, regardless of an accounts size. Investors are in fact part of a pool, that includes separate accounts or sub-accounts. These are traded by one money manager or trader that has been given limited power of attorney status. The manager has one master account in which the equity equals the sum of the balances of the sub-accounts.
Whichever type of account you choose there will be live read access to the managed account at all time. This will either be through an online report viewer, or via direct access to the trading platform. The balance of the account, as well as profit and open and closed trades will all be clearly visible. However, if a trader wants to place their own trades using either type of account it isn’t possible. Unless the limited power of attorney is revoked.
What is the point of a managed account?
With a managed account you get maximum safety, control, and transparency. But how does it work? An investor chooses a reputable broker and opens up a trading account. Funds are added to this account and only they can touch the money. However, the money is added to a pool which is then traded professionally by an experienced money manager or trader. The good thing about these sorts of accounts is that an investor can see exactly what is going on at all times,and choose to revoke the power of attorney if they aren’t happy with the way their funds are being traded. There is no lock in period and an investor can opt out whenever they want.
Looking at it from the money manager’s point of view, they can trade all investors accounts as if it was one large account, by using LAMM, PAMM, or MAM software and technology. Everything is handled by the broker with MAM, PAMM, or LAMM, and it is a seamless experience for the investors.
An easy and safe way to take part in the world of Forex
With a managed Forex account offered by a broker with PAM, MAMM, or LAMM, an investor can keep their finger on the pulse at all times. It won’t require years of time, money, trial and error in order to get to a point where profits can be consistently made on their own. Directing your own personal trading can be a very time-consuming business, as market movements need to be monitored 24 hours a day. Along come managed accounts and this problem is resolved, and investors who don’t want to trade on their own have the help needed.
Obviously we should mention there are no guarantees in the world of Forex. Much like other forms of investment, the value of currencies can go up as well as down. Using brokers with PAMM, MAM, or LAMM allows you to reduce the risk.