Trading successfully on the foreign exchange market may not be for everybody, but that does not mean you cannot profit lucratively and consistently from it.

If you lack the knowledge, expertise, or time to put in the trades yourself you can always use a qualified and successful professional who has a proven track record.

To increase your chances of success, using a Percent Allocation Management Module (PAMM) account is the best way to your forex profitability.

What is a PAMM Account?

There are traders who always seem to have that magic touch of churning out profits even in unpredictable markets.

Investors who lack the skills but have the capital may want to benefit from the skills and knowledge of such traders and thus,  they usually make investments through them.

In the foreign exchange market, most brokers will use special software known as Percent Allocation Money Management or Percent Allocation Management Module (PAMM) to pool the resources of multiple investors to be managed by one trader.

The investors are then allocated the proceeds of their investments (trades, profits, or losses) according tom the ratio of their individual investments.

Benefits of PAMM Accounts

Profiting in the forex market is not easy. It needs a lot of study, dedication, a great eye for detail, and acumen for making correct economic predictions.

These are not qualities that everyone possesses and thus a PAMM account helps investors benefit from traders who have such sought after qualities.

Furthermore, profits in the forex market are highly dependent on very small changes in currency prices. These tiny changes require huge investments for one to make reasonable profits.

To realize this, it is better for multiple investors to pool resources together rather than each to act alone. The increased capital also opens up doors to markets and trading tools that may be available to small investors.

A PAMM account enables investors to distribute risks and profit from these very narrow price margins.

How PAMM Accounts Work

To better understand how PAMM accounts work, let us illustrate with a brief and simple example. For instance, let us assume a money manager or a top trader is operating three different accounts.

The three accounts are funded thus:

Trader                                       Amount                      Ratio

Trader A                                  USD 200,000              35%

Trader B                                  GBP 180,000              40%

Trader C                                  EUR 300,000              25%

For each investor’s ratio calculations, all investment amounts are automatically converted to the US dollar based on the prevailing market rate.

Thus, if the money manager decides to purchase EUR 500,000, the order will be automatically shared between the three traders according to their respective ratios.

In such a scenario, the investors will get the following trade positions;

Trader                                      Position                                   Amount

Trader A                                  Long EUR/USD                     175,000

Trader B                                  Long EUR/USD                     200,000

Trader C                                  Long EUR/USD                     125,000

Money Manager / Client Relations

With a PAMM account, the trader usually has his/her own funds invested and thus, s/he is also at risk. This typically tends to reduce chances of the trader mismanaging the account holding the combined funds.

An advantage of PAMM accounts is that the trader or money manager can only trade the funds but has no access to the money.

The trades are conducted through one Master account but each individual investor has direct access to their own funds and only the legitimate owner can withdraw funds.

For each profitable trade, the trader will receive a commission and the rest of the profits will be allocated to each investor and credited to their accounts according to their respective trade ratios.

PAMM Software

While a good trader is essential for a well-performing PAMM account, getting the right software limits your risks and maximizes your profits.

Instaforex is one such developer of a great PAMM software platform that offers good security and fast trade speeds.

PAMM Brokers

Forex brokers offering PAMM accounts are not so many in the market at the moment.

Nevertheless, there are established and reputable firms that offer great PAMM accounts that have shown consistent profits for their investors.

While forex brokers offering PAMM accounts have some of the best reputations in the very tricky forex market, they do not all give their pooled investor accounts the name PAMM accounts.

Each broker’s accounts may have different names and will have variations in their rules and management policies.

Nonetheless, they are each worth looking into for investors who want to benefit from the knowledge and skills of more experienced money managers.

Conclusion

A PAMM account is a perfect tool for the investor who wants to benefit from the marginal price variations of the world’s currencies yet has no time or lacks the relevant knowledge for profitably managing a forex account.

A PAMM account is secure and is managed by a trader who also has a substantial interest in the good performance of the account since s/he is also an active investor in each trade made.

PAMM account software are made by reputable software development firms and have proven to be more secure compared to other types of financial trading bots.