Meaning of a PAMM Forex Platform and How Does It Work?

PAMM is an abbreviated form of “Percentage Allocation Money Management”. Sometimes, it is also referred to as the “Percentage Allocation Money Module”. In simple words, it is a managed account for traders that lets them allocate money to a fund manager for optimizing returns. Fund managers control investors’ money. Their main objective is to make profits and give them to investors who have put their money into the fund. Now, coming to the parties involved in the PAMM account, there exists a three-way collaboration between partners with equal rights. These three participants are:

  • Investor (provides money for forex trading through PAMM account)
  • Forex broker (offers a trading account and facilitates trading activities)
  • Fund manager (participates in forex trading by executing trades)

Let’s take a deeper look at each participant’s contribution:

A trader needs the assistance of a forex broker to deal in the currency market:

In the forex world, the role of a forex broker is undoubtedly important. The brokerage is responsible for offering trading platforms as well as different types of trading accounts. Thus, their main role is to offer investors and fund managers a safe and regulated trading environment, including excellent features such as deposits, withdrawals, leverage and other aspects that can enhance the overall trading experience.

Brokers have the freedom to set their own fees and minimum deposit requirements for traders to open an account with them.

Fund managers are highly accountable for the investors’ benefits:

It is the fund manager who is in charge of actual trading transactions which are carried out on behalf of the investors. Fund managers are required to maintain utmost security, and they cannot withdraw cash from traders. Thus, their access to traders’ funds is restricted.

pamm accounts

The Investors:

The PAMM forex platform allows investors to outsource trading operations to fund managers. Nonetheless, traders still remain active and have control over their trading account to determine how much money they are going to provide the fund manager. Additionally, investors can invest in multiple PAMM accounts simultaneously if they want to. Whenever a term ends, the investors have an option whether or not to continue with their current fund manager. They can switch to another fund manager partially or fully or even cash out their capital amount.

What Are The Reasons For Traders To Utilize A PAMM Platform? 

Here are some major reasons why the popularity of the PAMM platform is increasing every day.

  • A significant source of income: The kind of returns investors can get using a PAMM platform is unavailable in any other standard trading methods. Using the PAMM forex trading platform, traders can reinvest their profits, leading to higher interest generated on the initial deposits.
  • Passive Earnings: The best thing about using the PAMM platform for investors is they can have a steady cash inflow without having to work for the same. It’s like a passive income for many people. Thus, it is recommended that individuals start investing in a PAMM account using a small sum of money. The fund manager will be responsible for maintaining the PAMM account. All that you need to do as a trader is to study and evaluate the exchange’s activities, currency rates and some other important aspects. This can be a great advantage for traders for whom time is a great ally.
  • Minimum Risk: Another great advantage of using a PAMM account for traders is you benefit from the competency of the team of managers, which can lessen your risk significantly. The losses incurred by the first can be successfully offset by the profits made by the second member.
  • Utmost Safety: It is quite evident that traders like to safeguard their money at all costs. Consequently, when you use a PAMM account, the fund managers might not access the investors’ funds. Even the investors themselves have limited access to the PAMM account.

Conclusion:

PAMM forex trading platform is an automated system which has become a safe bet for many traders interested in forex trading. Here, the management is responsible for trading and distributing the cash as well as profits. Consequently, PAMM forex platforms have become quite prevalent and the most significant source of earning passive income. You can find several forex brokerage firms that offer PAMM accounts. Thus, you can browse several options online and decide the ideal option according to your trading needs.