Feeling a Little Confused About Brokers with MAM, PAMM, and LAMM Accounts? Let’s Explain…
Whether you’re new to Forex trading or have been enjoying the experience for a length of time, PAMM, LAMM, and MAM are expressions that may sound familiar. But do you understand the difference between them, or even know what they mean? They are all different types of money management systems that are available on the Forex market. When it comes to Forex trading there are a number of important decisions any type of trader has to make.There are choices about whether to use MT4 or another trading platform, whether to take advantage of any Forex bonuses, what trading style to adopt, and a whole load of other options, many of which we will be covering on our other pages. For now, we’ve decided to concentrate on these three money management systems, and give you some pertinent details to help you decide whether you want to pick brokers with MAM, PAMM, and LAMM accounts to help with your trading.
All three types of account are managed accounts with which a fund manager controls multiple accounts from a single one. They involve a fully segregated account that is individually owned by one trader at a brokerage firm. A professional trader or money-maker makes all the trades on the individual account holder’s behalf. This manager is only given access for trading – full control remains with the account holder.
Three different types of money management systems
MAM, PAMM, and LAMM may sound very similar, but there are some significant differences.
MAM (Multi-account manager) – This is a combination of LAMM and PAMM. It gives a trader who is managing investor accounts far greater flexibility.
LAMM (Lot allocation management module) – This is a trading system that allows a trader to allocate different trade lots to individual investors’ accounts. This also means that a trader gets to enjoy the flexibility of being allowed to use different leverages for different types of investor.
PAMM (Percent allocation management module) – This type of system allows a trader to distribute gains, losses, and fees on an equal percentage basis. Each account in the module will have the same percentage of returns as all the others, regardless of the size of the account. In effect, any investors are part of a pool that includes separate accounts and sub-accounts, all of which are traded by one professional trader or money manager who has a limited Power of Attorney. The money manager will have one master account, the equity of which equals the sum of all the balances held in the sub-accounts.
Whichever type of managed system is chosen, it will be easily accessed via a live-read feed. This feed will either be via an online report viewer, or through direct access to the trading platform. Everything to do with the account, such as the balance and profit, as well as open and closed trades, will be visible. The downside, if you can call it one, of these types of account is that a trader is unable to use them to place their own trades unless the Power of Attorney is revoked. Whether this is a downside will really depend on the reason for choosing one of these accounts. If you want an account that is managed by another person, there is unlikely to be an occasion when you will want to place your own trades.
Why a trader might choose to open a managed account
There are a number of valid reasons for choosing to open a managed account, and there is a good selection of MAM, PAMM, and LAMM Forex brokers to pick from. A managed account provides a trader with maximum security, control, safety, and transparency. The process is really quite simple as well. First, an investor picks a reputable Forex broker and opens a trading account, and makes a deposit which only they will have access to. The difference with this type of account is that the money is added to a pool, which is handled by a professional trader or money manager. The account holder is able to see exactly what is going on, and if they aren’t all that happy with the way the money is being managed there is the option of revoking the Power of Attorney. An account holder isn’t locked in for any particular time, and has the option to opt out should they want to.
But what about the money manager’s point of view? There are good points for a money maker too, as they get to trade all investors’ accounts as if they were one large one, thereby increasing the opportunities for making sizeable profits. The broker handles everything else, which makes it a seamless experience for all involved.
Managed account systems provide traders with a safe and easy way to participate in the Forex world.
Choosing a Forex broker offering MAMM, PAM, or LAMM accounts will mean you get to keep your finger on the pulse 24/7. When it comes to Forex trading, any level of success is going to take a lot of hard work, effort and determination, and a fair amount of trial and error. Managing your own trades can be a full-time job, but not everybody has the time or inclination to walk away from their normal 9-to-5 career and set off down the Forex trading road to who knows where. Managed accounts can be the perfect solution for those who don’t want to trade on their own, or for those who want to have a life outside of their Forex investment.
Are they the perfect solution? We have to be honest and say there are no guarantees in the Forex world. As with any other form of investment, the value of foreign currencies can go up as well as down. There are so many variables and outside influences that can have an effect, but there are ways you can improve your chances and reduce the risk. Brokers with MAM, PAMM, or LAMM accounts are one way, and we’ll be featuring a number of others later.