Trading strategies have become more diversified, with investment options that make participating in financial markets much easier and more automated.
PAMM and MAM accounts are some of those methods that can be confused with copy trading, which entails utilising an experienced trader to lead the investment activities and place market orders.
Users benefit widely from these investment methods, allowing them more freedom and giving them more time to focus on other aspects, such as market research and other financial markets, especially for those who practice trading as a side gig.
If you are ready to explore the differences between copy, PAMM and MAM accounts, here’s what you need to know.
Copy Trading
Copying someone’s trading strategy in the platform means choosing an investment system provided in the trading software, led by market experts who showcase their experience, markets of expertise, risk tolerance and gains records.
Users choose the trading system that aligns with their expectations and style and apply it to their chart. Traders enjoy the flexibility to adjust some aspects, such as trading lots, volumes, risks and stop-level and entry levels.
Challenges of Copy Trading Strategy
Solely relying on copy trading can be problematic because it hinders the user’s learning experience and weakens their analytical skills because they become dependent on the market expert they follow.
PAMM
The percentage allocation management module allows multiple traders to participate in a shared fund pool, where every user contributes differently and selects a money manager to trade with their funds.
The PAMM broker ensures the money manager also participates in the funded pool to guarantee authenticity and alignment of interest. Any profits or losses resulting from the manager’s activity are distributed among traders in proportion to their investment.
Challenges of Trading with PAMM Accounts
Traders have little to no control over their traded funds, where withdrawals and adjustments are only allowed after or before each trading session.
Moreover, if a trader wishes to withdraw earlier from the pool, they will face penalties according to the signed agreement before entering the PAMM trading.
MAM
The multi-account manager is a trading system where a money manager, usually an experienced investor, opens a master account on the MAM platform. Interested users can join the network through sub-accounts funded separately from their main accounts.
The master account is connected to multiple sub-accounts, and each trading activity done by the money manager is proportionally replicated to the sub-accounts.
Challenges of Trading with MAM Accounts
Despite the freedom that MAM accounts offer over the PAMM system. Over-reliance on an automated system prevents the trader from “learning by doing”.
Moreover, trading with a money manager does not guarantee profits because the market is dynamic, and the risk tolerance and acceptance level differ hugely between an experienced manager and an average trader.
Conclusion
Copy trading, MAM and PAMM money management systems are great tools to automate your trading sessions and diversify your investments in the market.
MAMs are more flexible, allowing traders to adjust their sub-accounts, similar to copy trading. However, PAMM accounts are usually locked in every trading session, allowing the money manager to trade with the participants’ funds with minimum interruptions or modifications.
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