How to invest in PAMM accounts?
The foreign exchange market has become very popular over the last decade, attracting more and more players to try their luck at trading. However, Forex trading is a very complicated business, which requires a lot of experience and specific knowledge, because chances to earn anything at the currency market are equal to zero for an untrained person.
Naturally, learning the basic rules of trading and gaining experience takes a lot of time, which not everyone has. One of the solutions to this problem was PAMM account technology, which appeared a few years ago.
With the help of this technology, you can put your money under the management of an experienced trader, who is professionally engaged in trading on the currency market, thus saving yourself from having to work at the exchange market on your own. The resulting profits are shared between the trader and the investors (the people with whose funds he trades).
However, as can be easily guessed, there is no guarantee that the PAMM-account with your funds will be forever profitable and please the investor with a constant income.
In other words, there is the possibility of losing all the money deposited to the account, as there is no guarantee that the trader you have chosen will not go into deficit as a result of unsuccessful trading. Therefore, when investing in PAMM accounts, it is very important to follow certain rules that help reduce the risk of losing your working capital.
So, the first rule of any investor - it is to adhere to diversification. Since forex trading is a risky business, you should not put all of your available funds in any one account. Spread your money evenly among several accounts of different traders.
The more profitable accounts you find, the better. This will not only protect you from losing all of your money, but will also increase your income, because if one of the traders suddenly goes into deficit, the profit made by the others will make up for their unexpected losses.
The second rule is that one should invest only in accounts that have been trading for at least a year. The fact is that the currency market is subject to the laws of economics, and, as we know, any economic situation is a very unstable thing.
That is, forex trading is also not stable, there are both easy periods, and difficult periods. Therefore PAMM-accounts that have been in existence for at least a year have gone through several different states of exchange, which cannot be said about accounts with a life of less than a year. This means that one-year PAMM accounts are managed by professionals who know their business very well, so the probability of losing money on such accounts is low.
And finally, the third rule - always monitor the status of your accounts. You should not use PAMM accounts as an alternative to a savings book, because even the most successful trader can easily lose your account, since forex trading is a high-risk activity. That's why you should withdraw your profit regularly.
Also you should periodically calculate the overall profitability of your capital and if it has significantly fallen, accounts earning less profit during the last several months should either be substituted with new, more profitable PAMMs or excluded from your investment portfolio distributing the released funds evenly among the remaining accounts.