PAMM stands for Percent Allocation Management Module.
arcacap PAMM Accounts are an investment service that provides investors the chance to profit without trading themselves, by allowing managers to manage their ac-counts.
How do PAMM Accounts work?
The concept behind PAMM accounts is that traders are given the opportunity to create a passive income, one that does not include high risk. This means that a trader has the option of offering capital management services, if he does not have the necessary capital to generate enough profit, in exchange for the percentage of the profit he has accumulated.
PAMM accounts are a simple method for individuals to carefully select their money man-agers for trading. With this kind of account, investors may profit with the minimal involvement required. However, traders should bear in mind that PAMM accounts also carry the risks of capital loss, based on how your account manager performs when executing trades. After understanding the profit potential and risk, individuals should carefully select a PAMM account broker and money manager.
Is a PAMM Account right for you?
- One single service allows you to easily interact and and invest in various PAMM managers
- Investor can deposit his account once and allocate his capital among sever-al PAMM managers
- PAMM manager will always invest in a more cautious and safe matter, since he risks not only the investors’ money, but also his own capital
- An investor may diversify risks by allocating capital among several PAMM accounts
- If a broker doesn’t enable an investor to set the maximum loss limit for PAMM account, the investor’s loss can hit “-100%” value, which means an absolute drawdown
- A relatively closed nature of PAMM accounts system: investor cannot of-ten study a trading style of PAMM manager in details
Is my PAMM Account Protected?
The PAMM manager can only trade for an investor’s capital. Although the capital of investors is managed by PAMM manager, he cannot withdraw it.
Equity of your PAMM manager
You should pay attention to the equity of the PAMM manager, while selecting a PAMM account. The higher the value is the equity value, the risk that PAMM’s personal risk man-ager will have during trading is greater. The value should be considered along with a total balance of PAMM account (Equity of investors + Equity of PAMM manager). At that, it is preferred if equity of PAMM manager amounts to no less than 10% of total balance.
An account manager will open a PAMM Account, investing a certain amount of his own capital known as the Manager’s Capital. He won’t be able to withdraw from this amount (an incentive for the manager to explain the risk in his trading). Next, he creates his portfolio, in which he lists the terms and conditions for the investors. This includes the percent-age of their share of the profit they will pay him in compensation.
Equity of Investors
The logic behind it is simple: a large amount of funds being under management implies a high level of investors’ confidence.
Profits and losses are allocated among investors and their PAMM manager, per the per-cent defined by the manager in PAMM manager offer. Simply speaking, the offer is an agreement regulating relationships between investor and PAMM manager. The profits or losses resulted from a trading activity of the PAMM manager is allocated between investors in proportion to their percentage share.