PAMM, LAMM or MAM – is it a scam?

No, it is not apparently. All three are different ways of allowing a money manager to trade the money for investors through the broker. The main benefit – both parties involved are protected by the broker. So whatever your role in this combination, broker will be doing all due diligence for you, making timely payments to the manager and can immediately stop the trader’s access to the account if investor is not happy with what’s going on.

Read further about: …or invest in FXfreelance PAMM account:
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In simple words – each investor has the same account as usual, but with no rights to place or close the trade. Money Manager in most of the cases has no right to withdraw or deposit money, but only press sell or buy buttons. Investors see on their account the amount they deposited, plus (or minus) profits. Money Manager sees all the money deposited by all investors all together and trades it like a one account.

What’s the difference?

Well, PAMM stands for Profit Allocation Money Management. Which means that investors don’t have actual trades visible on their accounts, but each time Money Manager closes the trade, certain percentage of the profits are added to each of the investor’s account, like a deposit.

LAMM (Lot Allocation Money Management) works in slightly different way – each time Money Manager opens the trade, certain percentage of the lots, that he (she) opened is allocated on each of the investors accounts, therefore investors can see the open trades and monitor what is happening in particular moment. That looks like a better option, but in reality creates much more problems due to miscalculation or rounding on the broker side. Especially if there are investors with significantly different amount of money involved. If you have a choice, we would recommend to go for PAMM option.

MAM – is a Multi Account Management abbreviation, which can mean any of the above or anything else, that dodgy broker can hide behind. If you come across MAM software or MAM service – better dig deeper what they actually mean by that.

The reality, brokers truth:

Couple of things to keep in mind in the current brokers environment: First, UK, Europe and absolutely exceptionally US are highly regulated financial zones. Brokers, who have a license to operate in here, are significantly more trustworthy so in “all equal” conditions should be preferred by any trader or investor. However, under current legislation it is almost impossible without certain high qualification for the money manager to get a PAMM account through regulated broker. Very few brokers offer it as a result. FXCM Malta, FXDD UK and couple of Cyprus brokers are ready to take onboard such business, but be prepared that investors will suffer a lot of paperwork to join the account. Most importantly, none of the brokers will list or advertise a successful money manager and few will offer a convenient way to merge the service with most popular trading platforms like Trading Station or MT4.

At the same moment, brokers based out of the strictly-regulated-trading-zone are fully up to speed with this new service. They offer convenient way of comparing existing account managers, super-fast account approval and unlimited number of potential investors per one trader. But keep an eye on the country they are incorporated in, banking system and the regulating body. For example, couple of brokers in Mauritius are regulated by FSC, which is Mauritius analogue of UK FSA, a body very much concerned about their EU reputation. While InstaForex or Alpari Russia are regulated by FSFM, which first of all grew up from the community of Russian brokers (so it is nothing similar to FSA or SEC) and most importantly – forex business is not regulated in Russia at all – there is simply no legislation mentioning this type of activity.

Private management or PAMM?

That is a new question for endless forum discussions. On PAMM side – for money manager: payments are guaranteed; and as an investor: you have a way to cut off the manager with immediate effect or re-join later.

Another important matter – the accessibility. We know none of regulated hedge funds accepting small investments. Equally difficult is to find a prop-trading firm like ours, which will take a private account to manage with less than 4-5 zeros in the amount. But PAMM/LAMM accounts are starting from as little as 200-500$ initial investment. Any teenager can participate. More or less same comes for traders.

But saying that – from trader’s prospective – none of the big sharks will be happy to invest in a publicly available account. As an investor you will always need to accept standard conditions and fees, which can be quite high comparable to the private management options. As a rule of thumb – if you are new to investing or have a small amount to try with – go with regulated safe, but expensive option of PAMM investing. If you have 5 or more zeros to play with and have in-depth understanding of your trader’s risk profile – bargain a better deal through private management.

But if you decide to go for PAMM – do not expect less homework to do. You still need to find as much information as possible about your trader: check the experience, make a personal contact, even if you are dealing through broker, ask questions.

PAMM with FXFreelance.

Ok, so you consider investing in FXfreelance. We prefer to combine all small investors under same simple conditions on PAMM account. If you think you are not a small investor or you have special requests, please contact us – we would be happy to help.

We hold PAMM accounts with HotForex and FXCM Malta. We did try to deal with almost every broker on the market, including SAXO bank, FXDD, InstaForex and others. Some of them do not provide convenient way of dealing through MT4, some – require too much paperwork from investors and others are not trustworthy enough. Drop us a line if you think you know something we don’t, we are always open to reconsider.

Here is the chart of our HotForex public PAMM. Click on the chart to join, or email us with any questions.

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