Things You Should Know Before Signing Up For a Forex PAMM
So, you’re looking at signing up for a Forex Percentage Allocation Money Management (PAMM) system, so that you can soon invest in forex hands-free? Great! But just before you hurry on and do so, here are some things you should know, so that this will be a smooth, profitable and even enjoyable experience. By following this guide, you will be able to avoid the anxieties that drive many investors into early-withdrawal and sustain bad losses that shouldn’t have happened in the first place.
While this blog post describes many important considerations, if you are fully serious to starting a PAMM account, there is also a video toward the end of this blog post where I discuss all the things you should know before you sign up for your PAMM service.
If you are unfamiliar with PAMM, I highly recommend you read my Forex Managed Account page before coming back to this post.
Disclaimer: The ideas I share here are entirely my own. While most of this content will apply to all forex managed account systems out there, I can only vouch for my own, the FireYourBossV2, as I am the creator and operator of this strategy. While no systems out there aim for failure, it is sometimes inevitable if the operator is not the creator and may not know how to manage problems that arise that are outside of the operator’s planning. I take pride in making constant adjustments and improvements to my system. I can’t say the same about others.
Why Are You Auto-Trading?
Is it because you do not have time? Or are you new to trading? Or, do you know about Forex, but for certain reasons, i.e. poor money management – you fail to be profitable? Or, do you currently also trade manually, but because you’re trying out a couple of ideas, or you’re not always available and hence you want an account that can bring you constant profit? Only you can know this reason. Everyone is different. Your reason could be a combination of the things I’ve suggested, or something else totally. Comment below this post! Whatever your reason is, know it, and DECIDE to keep a “Hands-Off” approach.
If you cannot “hands-off” your acc, if you’re constantly checking the floating loss, floating profit, closed trades, checking on open trades – you’re seriously better off trading yourself. You will never have peace of mind in this, I guarantee you that.
Even though I manage a very profitable Forex Managed Account Strategy, which I call “FireYourBossV2”, I have had to turn away several people who are mentally unsuitable for this.
How Does Your Prospective Forex PAMM Master Trade?
It is every investor’s duty to do due-diligence in understanding the way the PAMM master trades. This can be gathered from the PAMM’s statistics page, or the system’s MyFXBook profile. You can review the trade statistics, win/loss ratio, etc. Ideally, you should only invest in a system that exemplifies ideals in trading that resonate with yours.
I.e. If your idea of trading is big-lot scalping or finishing your fixed lot trades within the day, then you probably shouldn’t be involved in a system that uses hedging and martingales.
My system has 3 core components. Trend-riding, Hedging Losing Positions for Eventual Profit, Scalping Moments of High Volatility. These 3 components work like a tag team in delivering you consistent daily profit through either or a combination of the components. You can read more information and find videos that explain this on my Forex Managed Account page.
These are my most current 30-day statistics from my FireYourBossV2 PAMM account.
In the video at the end of this post, I also discuss terms like Profit Factor and Expected Payoff.
Are You Truly a Business Owner – Investor or a Self-Employed?
The moment you start investing in a forex managed account, known as a PAMM, you become an “Investor” in Robert Kiyosaki’s definition of his Cash-Flow Quadrant. It’s a great place to be, because you get to earn money from an income-producing asset, which is your Forex PAMM account. In fact, you’re even like a “Business Owner”, where in my system, I’m your employee who’s shared by everyone else subscribing to my service.
The duty of a Business Owner and Investor is to stay in the shadows, or the sidelines, letting the business work for you, without a shadow of doubt on the way that it works, because you should have already done your research through the trading statements, or sampled with a small test amount in the beginning enough to have confidence in how it handles problems that arise out of planning.
For instance, in FireYourBossV2, floating loss has never exceeded 15% even under the worst circumstances, and the worst month, April, merely had no profit, but no actual loss. The loss reflected on myfxbook is simply due to broker fees and commissions which is part and parcel of trading.
However, if you constantly see a need to “meddle”, it is a tiring process, and even if you enjoy it, you are being like an employee rather than a business owner/investor.
Understanding Floating Loss: Every Business Needs A Working Budget
Every Forex trader must know that in forex trading, stocks trading, CFDs and crypto trading – there is spread and commission. Spread is the difference between the buy and sell rate. This is a markup on the average price the broker receives which the broker imposes to ensure that they profit for brokering your transaction to the live market.
For this reason, EVERY TRADE will start negative. This is a FACT of forex trading that is UNAVOIDABLE.
The other thing that you must understand as a prospective PAMM investor, is that every business needs a “working budget”. It is not a bug of the PAMM’s forex trading strategy that your account is in floating loss.
For those of you who are business owners, you possibly remember pooling money with your partners for the purchase of business equipment or for business promotional expenses. All these are the costs that you necessarily spend. Without which, you can’t commence that business at all!
Imagine an empty shop with no desks or chairs, no lighting, no air-conditioning, no staff. On top of that… no signboard, no promotion. No one even knows what the shop is for even though you’re supposed to be “in business”. You get my point, right?
The Trader’s Control of Floating Loss Is Very Important
While floating loss is necessary, it is important it is well controlled. It should not be allowed to run wild. I typically budget my floating loss between 3-9%. But, there are market surprises. Maybe 1-2 a month. Like businesses, I also have a “reserve allocation”, this is when in case of opportunity despite being under the market’s challenge, I will let the floating loss run to 15-20%. As I use a combination of strategies, each strategy has it’s own cut-off or “Hard Stops”.
To help you perceive this better, here are two screenshots taken from my PAMM system that is running on FXPrimus.
The first picture is the current floating loss. The second picture is the amount of money that has been made in the past 30-day period. You can click them for a close-up view.
As you can see, the banked profit has surpassed the “working margin”, a.k.a. floating loss. You can find out more about my Forex PAMM system HERE.
The first month’s trading goal is to replace this “working budget” with banked profit!
Equity Vs Balance
“Initial Balance” or “Starting Balance” refers to how much you start this PAMM account with.
“Account Balance” refers to the current gross balance of the account. While current gross balance factors in profit and loss from closed trades, it does not factor in profit and loss from currently open trades.
“Equity” refers to the current available balance. In your own regular bank accounts, you may be familiar with this term of “available balance” which is the nett amount left after certain amounts are ear-marked for bill payment arrangements or cheques you could have issued but not yet debited from your account. In forex, Equity is the available balance, the nett remaining – if all open trades – regardless profit or loss, were closed there and then.
As previously explained that all accounts need a “working budget” to actually generate profit, do not be alarmed if you see your equity lower than your initial balance. While this is a norm that may go against many peoples’ senses, you will soon get used to it when you start to know from your daily statements issued by broker, that your account is actually growing.
Generally speaking, most PAMM investors should see their equity rise above their initial balance in their second month. I explain more about this in the video toward the end of this post.
Statements Only – No Real-Time Access To Open Trades
No matter what broker you use, whether the PAMM you join is a broker-level Trade Copy, such as FXTM Invest, or a PAMM, such as the one that FX Primus and many other brokers use, you don’t have access to seeing your open trades until the end-of-day rollover period when your account is snapshot and you are sent an email statement of this report.
By the way, you may also be interested to read my blog post comparing investing on FXTM Invest vs FXPrimus PAMM.
This is what a email daily trade statement looks like.
Generally, this is not something to obsess about. Most importantly, there should be regular gains. Ideally, this should be daily. My system typically makes between 0.4-1.4% per day, which averages out at 0.8% (according to myfxbook). However, look over them every other day or so, to watch out for any significant differences to the trades made, which may reflect a change in the trader’s strategy plan. If so, you deserve to know why.
Be sure to watch the video in the following section to understand more about this.
One of the red-flags to look out for is if there are suddenly significant differences to the trade size. If there are 1 or a few significantly larger trades than the others, is the trader doing some manual trading? Is he doing an emergency hedge on a running loss? What is his experience in this area? For instance, if most of the trades are 0.04 lot, there’s no reason at all why you should see a 2.00 lot trade appearing.
All investors in my FireYourBossV2 PAMM are entitled to being on my Telegram investors’ update chat group. When I adjust the strategy or if there are market conditions that warrant my manual interventions, I always inform in the group. Find out more information here!
I hope this entire blog post and video gives you a comprehensive idea of the things to look out for when investing with a managed forex account system, otherwise known as a Forex PAMM.
Just to remind you, while these ideas and concepts should generally apply to all Forex PAMM systems out there, but that’s not to be taken as a universal truth. If you read my Zulutrade review, you’d have understood that not all systems are created the same. Some creators have far less commitment in your success than others, and some are merely satisfied to make a quick buck in what’s merely a “game” to them and hit and run, while others like myself have a long term vision where my success lies in your success.
All the best to your Automated Forex Profits!