This article assumes that the reader already knows what PAMM is and now faces a choice – in which manager to invest their own funds? The question is complex and ambiguous; so-let’s get started!
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The tactics of PAMM account managers are different-some prefer to “go quietly, but continue to be”, while others believe that it is necessary to “either think or take risks”. What appeals more to the future investor is his own business, but it is extremely necessary to evaluate the work of a trader before pouring your funds into his account.
To do this, you need to get access to the data of the PAMM account for the last six months. By the way, if there is no such data, or access to it is somehow limited, then it is better to bypass this trader by the tenth road.
Next, you must either independently determine which type of PAMM managers you are interested in, or rely on the broker’s assessment. It is best to consolidate this data. To do this, you need to imagine an approximate characteristic of the trader’s work: CONSERVATIVE, MODERATE (medium-risk) or AGGRESSIVE (risky). The conclusion is made based on the combination of the following parameters.
Loading the deposit
The percentage of the total amount of investors ‘ funds in the account that is involved in transactions. The higher this parameter, the more aggressive the management trader’s tactics are considered. Obviously, the more funds involved, the more risky the game and more profit, in the case of successful transactions. A value of less than 10-15% of the initial level is considered normal and safe; a half load (50% of the initial level of funds in the account) is considered an extremely risky and aggressive value.
The amount of losses, as a percentage, of the initial amount of funds in the trader’s account. Drawdown, when working in the Forex market is inevitable-this is understandable, but the trader must control this parameter and take adequate actions. If, judging by the account history, the manager has allowed a drawdown above 30% of the initial level over the past six months, this tactic is considered aggressive and risky. On the other hand, working without drawdowns should alert you; PAMM investing in the work of such a manager is not recommended, most likely, he shows not quite honest data about his work.
And the overall impression of the work of this trader. It will be extremely useful to find out his previous achievements – how many accounts he “merged”, on how many he achieved success, what are the volumes of his own funds?
The combination of these parameters and the above ones-the deposit load and the maximum drawdown – make up the assessment of the PAMM account manager’s performance. Also, you should compare your own rating with the one recommended by the broker. Based on this data, you can take further actions.
The above methodology for evaluating the work of PAMM managers should not be taken as a dogma, but it is worth taking a closer look at it. It is also recommended to use it when diversifying risks. That is, to invest simultaneously in the work of different managers with different management strategies of trading. Thus, it is possible to reduce financial losses to zero, even in the conditions of such a risky enterprise as Forex.mo