What is PAMM account?
The pamm account short definition is Percent allocation management module or percent allocation money management. This service usually finds at Forex broker. But what does it mean?
It is a passive investment type. Then you trust your money to someone who is going to increase your fund.
How does it work?
Let’s say trader who is working profitable and every month makes profit 10-20 %, wants to increase his trader balance but do not have enough own fund. The best way to allure money is to become a money manager rather borrow in a bank. Since he gets trust from a pool of investors, the trade balance increases. As a result of it, he increases his positions in trading, regarding increased balance.
On the other side you, who wants to invest money and earn a profit. PAMM Forex systems allow you to invest money in selected traders (money managers). Pay attention that then money manager (trader) gain profit, you will pay him the commission. The commission can be variable. Most noteworthy, 20 or 50 % of profit.
For example. Trader attracted funding of six investors for $100 000 with 20% performance ( of the profit) fee. The risk capital is different. The trader works with an account balance $100 000 now. Very important to understand, that, your investment is not in the trader’s account. The trader can trade accounts only without permission to withdraw investor money. So you can sleep well without worry. Then the trader makes a profit of $12,500, and because in this example the commission fee is 20% that equals to $2,500 of profit in commissions. $110,000 stays in the fund account. The $10,000 profit made will be shared back to the investor’s accounts based on the percentage of their share of risk capital in the pool.
Infographic example how investments and profit shares by given example.
One of real fund balance account in the marker.
Do not forget that the risk stays on your side as well. How to select low risk PAMM account you will find here.
Finally, then you will find the excellent trader, the passive income will.