Forex for Beginners - pros and cons of PAMM account

Photo: Wikifx

A PAMM (Percentage Allocation Management Module) account is a management module used by forex money managers to trade money on your behalf with a 100% transparency.

How does it work?

You open an account with a broker recommended by the person trading your account. Within your new account, you are the only authorized user that can fund or withdraw funds. The fund manager only has Trade Only Rights and cannot deposit or withdraw funds. Your money deposited and is placed in a pool along with other clients money

Based on your percentage in the pool, the profit and loss will be calculated accordingly. Eg. If you are placed in a pool and your money takes up 5% of that pool, if the money manager generates a money profit, you will be allotted 5% of the total profit.

Advantages:

• Full Transparency.
• Money is paid to the trader based on performance, so if the trader does not make you money, they don't get paid.
• Withdraw & Deposit at your own convenience without penalty.

Disadvantages:

• Your money is being traded by a third party, so ensure you have seen his/her track record, ask about risk management etc before investing.

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