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MAM, PAMM, RAMM & LAMM – Managed Forex Accounts Explained
Forex trading is highly competitive, so traders must possess the necessary skills and experience to succeed in it. Forex trading can be a lucrative venture provided the traders know how to remain disciplined and patient because it takes time to get the desired results in the forex market. However, not all traders have the necessary qualities to become successful in forex trading, so some of those succumb to the pressure of the market while others play smart and hire the services of established traders that offer managed account services in exchange for a performance fee.
The concept of a forex-managed account revolves around the conventional hedge fund platform but with a few changes to suit the forex trading environment. Many forex brokers now offer the option of a managed account, which allows fund managers to get in touch with investors from all around the world and serve them by managing their accounts and portfolios on their behalf. There has been a significant rise in managed accounts of late, especially in the retail trading market. Many institutional investors are now looking for skilled forex traders to manage large capital through multiple investment funds that promise high returns at low risk. This allows even a beginner or novice trader to explore the forex market with ease by utilising the potential possessed by a professional trader or fund manager.
Types of Managed Accounts
Before opting for a forex account management service, you will have to decide what are the aspects that will be covered as you handover the account to the manager. Firstly, there are 4 different types of managed accounts and they all differ from one another. So, we will provide you with a brief discussion of each account type so that you can decide which one would be most ideal for you moving forward.
PAMM Accounts
PAMM accounts are one of the most popular account types used by traders to avail the services of a professional fund manager to grow their trading account. PAMM is the abbreviation of the term ‘Percent Allocation Management Module’ also referred to as ‘Percent Allocation Money Management’. This is more like a practice to pool funds from different investors and the manager will be handling multiple trading accounts at once. And for investors, they can choose to allocate a desired proportion of their trading capital to a fund manager of their choice as they will be taking control of the trading activities on their behalf. The fund manager will be the decision maker when it comes to opening and closing trade positions for all accounts managed by them.
In short, the investor can enjoy the profits resulting from trades but at the same time, will have to bear the risk of loss if it happens.
MAM Accounts
The second most popular account type is MAM accounts which can be elaborated as ‘Multi-Account Manager’. Just as the name suggests, MAM accounts are professionally managed by a manager similar to PAMM accounts. MAM forex brokers employ fund managers who are in charge of all the trading activities carried out in multiple accounts. One thing to note down here is that MAM accounts offer a greater amount of flexibility in comparison to other types of managed accounts. The trader or investor can choose to follow a number of professional traders as well as exercise total control over the percentage of capital handled by each of these fund managers. Along with that they also get to make a decision on the maximum amount of risk for their account as well as the max leverage they would want on their trades. Hence, a MAM account investor gets more control on their funds which makes it an apt choice for traders who already have some market knowledge and experience and are well-equipped with risk management skills.
RAMM Accounts
RAMM is the abbreviation of the term ‘Risk Allocation Management Model’ and just as the name indicates this account type was founded upon the concept of risk management. RAMM accounts closely follow the modern risk management principles making it a revolutionary idea in itself. RAMM accounts can be seen as a combination of PAMM & copy trading concepts. RAMM accounts allow investors to dive into the very same trading experience as they can directly copy the trades of the professional they choose to follow, as they also get a chance to verify the entry and exit points to manage the risk. They get to enjoy the benefits of self-copying functionality instead of auto-copying where they exercise less control and are exposed to risks resulting from the fund manager’s decisions.
LAMM Accounts
The fourth and final account type we will be talking about is LAMM which is the abbreviation for ‘Lot Allocation Management Module’. LAMM Accounts are quite different from the above three account types as the master trader or professional does not really manage the funds of the investor here. They do trade on the behalf of the investors but the trades get executed in a copy trading mode. The investor’s account will be copying the trade positions in the professional trader’s account. Trades will be copied automatically based on the professional trader’s strategy but the trader does not even know about the amount of funds that are there in the accounts of investors who follow him/her for copy trading.
How Does a MAM Account Work?
We already explained what a MAM account is in a brief description. Now, we will be getting into the details to get a clear view about the workings of a MAM account. To talk about the technical side of MAM accounts, it is a software setup that enables an account manager to manage multiple accounts from a single trading terminal. A number of accounts belonging to different traders will be connected and consolidated to a centralised terminal so that the account manager can easily trade from there and all of the accounts linked with it will be updated automatically.
This kind of technology allows MAM account managers to professionally manage multiple accounts without any complications or confusions. Most brokers will be using the cutting edge technology of MT4 or MT5 trading platforms to eliminate the chances of humour error in the process. Many MAM account brokers will have MT4 account managers to handle multiple accounts or may even offer their own technology driven trading platform to maximise the potential of MAM accounts. The fund managers are compensated on a profit sharing basis which is mostly predetermined. But you won’t have to worry about the security of your funds, since account managers can only use the funds for trading and do not have the power to withdraw or add funds themselves.
Difference Between PAMM, MAM, RAMM, and LAMM Accounts
- PAMM accounts and LAMM accounts do not allow investors to take part in trading activity or deciding the risk percentage. They can only decide upon the proportion of the amount to be invested for being managed by the fund manager. Whereas MAM allows investors to manage their risk to a certain extent giving them more control. Similarly RAMM accounts allow investors to see the trading activities in real time to learn from them or take action in case of any deviation.
- PAMM accounts are purely based on the fund management concept where the manager does have most control over trading. LAMM accounts are dedicated for copy trading and the one in control of trading is not really managing funds. MAM account managers also have control the investors get to decide about risk and leverage. RAMM accounts on the other hand is the perfect combination of PAMM and copy trading concepts.
- PAMM and LAMM accounts are perfect for traders who are complete beginners or not that experienced in the forex market. They can minimise the risk that comes with inexperience by entrusting their account to a professional with skills and experience. Whereas with MAM accounts, both novice and experienced traders get to avail benefits of professional trading while still making decisions about risk management. RAMM accounts are more suitable for learning and getting experience as you can see the trade positions in real time.
How to Choose a Reliable MAM Forex Broker?
Once you make a final decision regarding the type of account you want to open, you will have to make another crucial decision which is choosing the most ideal broker for opening a MAM account. There are quite a few MAM brokers in the forex market and picking the best one among them isn’t an easy thing to do. Hence, we are adding a list of top 3 MAM brokers along with their pros and cons to simplify the decision making process for you all.
Fxview
Fxview is a multi-regulated broker offering trading services in different countries. They are a low cost regulated broker …
Fxview is a reputed broker operating under the licence and regulations of several authorities around the globe including CySEC. They offer raw ECN accounts to traders allowing them to enjoy a faster execution with solid trading conditions that are favourable for all kinds of trading and would support any trading style. They offer 3 advanced trading platforms for traders which includes MT4, MT5 and feature-rich ActTrader. They provide two different account types as choice to make it an inclusive platform as traders can go for a regular raw ECN account or Islamic account if they are religious traders. They charge a commission of $1/100k per side and spreads starting from 0.0 pips on major pairs. They also allow a variety of trading strategies including hedging, scalping, algo trading and more. They provide a maximum leverage of 500x and you also get negative balance protection.
Pros
- Reliable and regulated.
- Ideal trading conditions to meet the requirements of different types of traders.
- Live chat customer support.
- MAM account investors can check their account performance in real time and also download monthly reports as and when needed.
Cons
- Does not offer their services in certain regions like the United States due to geographical restriction.
FXPro
FxPro is a regulated broker offering range of instruments to trade across all assets. They have an excellent customer serv…
FXPro is another leading broker serving clients all over the world and operating under the regulatory framework of several top authorities including the FCA and CySEC. They offer 4 different trading platforms to choose from, including MT4, MT5, cTrader and their own original FXPro trading platform. They provide ultra fast execution with no dealing desk intervention which allows them to lower the trading cost and minimise possible slippage. They provide 1:500 maximum leverage and spreads starting from zero pips on their raw plus account. The commission charges for the same account type is max $3.5 per lot per side. They offer 4 different account types to choose from namely standard, Pro, Raw plus and Elite account. They also offer negative balance protection to their traders using leverage.
Pros
- Regulated and trusted.
- Live chat customer support.
- Provides a number of account types to choose from.
Cons
- Does not offer their services in certain regions like the United States due to geographical restriction.
AAAFx
AAAFx is an international crypto forex broker, offering lower spreads and fast trade execution in forex, indices, commodit…
The third one to complete our list of the top 3 MAM brokers is AAAFx. Another reliable broker with multiple regulations including HCMC and FSCA. AAAFx is another broker that provides ECN connectivity on their platform allowing traders to take advantage of deep liquidity and solid trading conditions. They provide spreads starting from zero pips and even introduced ECN zero accounts where traders get to execute trades at zero commission. Other than this they also offer regular ECN, ECN plus and Islamic accounts for traders to choose from. The commission on ECN plus accounts is $1.5/100k and for regular ECN and Islamic accounts they charge a commission of $2.5/100k. They offer 500x max leverage and negative balance protection on all account types. They offer 3 different trading platforms which are MT4, MT5 and ActTrader.
Pros
- Regulated by different authorities.
- Live chat customer support.
- Provides a number of account types to choose from including commission free accounts.
Cons
- Does not offer their services in certain regions like the United States due to geographical restriction.
Advantages of MAM Accounts
- Traders or investors with time constraints can take advantage of MAM accounts to generate profits.
- Beginners can start exploring the forex market right away with MAM accounts without investing a lot of time for learning.
- Even experienced traders can improve their profitability and find an edge using the strategies of professional traders.
- Safety of your funds will be ensured by the MAM broker.
- You still get to exercise complete control over your capital as they are only allocating a certain percentage to the fund manager for trading.
- You get to manage your risk and leverage yourself.
Disadvantages of MAM Accounts
- Having an account managed by a professional does not fully eliminate the risk of loss.
- Regular monitoring of account performance is recommended even while using MAM account services.
Advantages of PAMM Accounts
- Novice traders can easily access the forex market as they get to benefit from professional level trading by using PAMM account services.
- Since the PAMM account manager will be handling their own funds alongside the funds of investors, they will be more careful and will try their best to execute profitable trades.
- You can choose to allocate funds with different managers to optimise the performance of your account.
- The manager or professional trader will be using the funds for trading only and you still get to make decisions regarding withdrawals, funding etc.
Disadvantages of PAMM Accounts
- You have less control over your funds and cannot make decisions about risk and leverage unlike MAM accounts.
- PAMM accounts do not guarantee profitable results.
Advantages of LAMM Accounts
- The master trader is not managing your funds directly.
- You get to follow their trading with the auto-copying feature.
- Even traders who are complete beginners can make profits with LAMM accounts by following the strategy of an experienced trader.
- LAMM accounts give an easy entrance to the forex market space.
Disadvantages of LAMM Accounts
- Copy trading is not risk-free from any means and profitability is not a promise.
Advantages of RAMM Accounts
- Investors can avail the benefits of both PAMM and copy trading as RAMM account concept combines the best of both.
- RAMM accounts are considered the safest out of all 4 types of managed accounts.
- Investors also get an opportunity to learn and manage the risk even though the account is professionally managed.
- You get to experience trading with a self-copying feature.
Disadvantages of RAMM Accounts
- Only a few brokers offer RAMM accounts in comparison to the other 3 account types.
- The risk is less but the end result is not guaranteed.
Which Factors To Consider When Choosing A MAM Trading Account Manager
Here’s a list of factors that you should keep in mind when choosing a MAM account manager:
- Historical performance, average P&L, maximum drawdown, and volatility
- Account age
- Types of instruments traded and average trade size
- Trading strategy
- Use of leverage
- Risk appetite
- Success Fee
- Fee on early withdrawal
- Allocation type – equity, percentage, loss, etc
- Rollover period
How To Achieve Success In MAM Trading?
There is always a risk factor involved with investing in an MAM account, as just like any other investment, it doesn’t guarantee 100% success. To mitigate the amount of risk and improve the chances of making good profits, here is what you need to keep in mind:
- Begin with the lowest allowed investment sum to get the hang of the process.
- Monitor the trades carried out by the trade manager, as he/she should allow serious drawdowns. Also, pay attention to the stats for as long as you can.
- Always use risk management to keep your losses in check.
- Diversify your investment, wait for the results to appear, and then make your final picks.
- Only add the capital once the account shows a stable yield for more than 2 months.
FAQs
What is a MAM account in Forex?
MAM is a specially designed software for MetaTrader 4 that allows portfolio managers to manage all the sub-accounts from a single master account. The software now supports MT5 platform as well, with some brokers going a step further and offering proprietary platform MAM solutions. A MAM account automatically connects to the master account, copy all the trades using PAMM or LAMM.
What is MAM Trading?
MAM trading is a phenomenon where investors connect their trading accounts to a master account that is managed by experienced traders or asset management firms. An agreement (LPoA) is signed between the two parties that make the investor liable to pay a performance fee to the manager under the regulatory framework of the MAM broker.
What is a MAM Broker?
A MAM broker is responsible for providing the software and infrastructure to support portfolio managers as well as investors.
How Does MAM Work?
Using a MAM account, seasoned managers can get full control over a predetermined section of your broker account. They will be able to place trades on your behalf with your money and conduct a market analysis for better trading opportunities.
Should I Open A MAM Account?
If you have a decent sum to invest in the forex market and want an expert account manager to execute trades on your behalf, then a MAM account is ideal for you. MAM accounts are completely transparent, thus letting you see the trades being made and closed along with your trading capital.
What To Look For When Choosing An Account Manager?
Consider working with a manager who is transparent, has a good track record, and is open to answering any question.
What percentage of my portfolio should I allocate to the MAM account? Should I have one or multiple MAM accounts?
This depends upon your risk tolerance and diversification strategy. Many investors like to have their investments broken up across different trading instruments and strategies, so you can choose to go with the same strategy.
What’s The Minimum Amount To Invest In A Mam Account?
The minimum amount varies from broker to broker, so you can confirm it with your broker and invest accordingly
When Will I Receive My Funds From My MAM Account?
Every broker has a payment cycle, minimum withdrawal amount, and methods available for withdrawals. You can check out all the information on the broker’s website or by contacting their support team.