Best Forex MAM Brokers & PAMM, LAMM Accounts 2021
Trading financial markets successfully is a combination of money management and knowledge. Traders dedicate a lot of their time to analyse the market and set up their trading plan.
However, not everyone has the time to trade the markets actively, and wait for the prices to move. For those in this position, MAM, PAMM, or LAMM accounts offer an alternative to actively trading your own account.
What Is a MAM, PAMM, LAMM Account?
MAM stands for Multi-Account Manager, and the name says it all. A money manager trades and will manage multiple accounts using software offered by the broker that distributes the trades to different accounts simultaneously. It uses different allocation methods (i.e. balance or equity allocation), and it can support unlimited trading accounts.
A PAMM (Percentage Allocation Management Module) account enables traders to invest in other accounts or to receive investments in their own account and strategy. At the end of a certain period, the eventual profits are split among the investors of the account.
The LAMM (Lot Allocation Management Module) is a variation of a PAMM account. The lot allocation principle means that each individual account trades the same volume as the manager’s account.
These accounts are widely used in the Forex market because FX offers good liquidity.
How Can You Use a MAM, PAMM, LAMM Account?
A managed account allows traders to benefit from diversification and take part in other trading strategies’ without committing time. The features of managed accounts differ from type to type, depending on how the trades are allocated and the conditions imposed by the brokerage house.
For instance, in a MAM or PAMM account, allocations to accounts are as little as 0.01 lots, and all order types are accepted. All orders executed in the main (master) account are transmitted into the rest of the accounts respecting specific parameters set by the person that manages the main account.
Typically there’s a performance fee paid to the one that handles the main account, and it varies from broker to broker. Some accounts use a watermark level, ensuring the performance fee is paid only once for a certain level.
Pros and Cons of a MAM, PAMM, LAMM Account
- the fund managers can’t touch the funds in the trading account
- experience and profitable history brought in by the account’s manager
- you’re not in charge of the actual trading strategy – you’re just a follower
- high fees paid for the trading services
Factors to Consider When Choosing a Broker for a MAM, PAMM, LAMM Account
Managed accounts are nothing but pooled investments. Depending on the type of the managed account (MAM, PAMM or LAMM), investors can choose the conditions, set the risk, and adjust the variables in such a way that the strategy suits the goal of growing the account.
One must also consider that the risk with a managed account depends on the profitability of the trader and the strategy used. For instance, long-term strategies may not be suitable for short-term oriented traders. Because risk-aversion differs from person to person, drawdown plays a significant role in the way to handle a managed account.
MAM stands for Multi-Account Manager and is a software that includes advanced charts and analysis tools to help managers with the allocation methods or let them trade each account with different conditions using just one platform.
Managed accounts use software that commonly operates with MT4, MT5, Currenex, Trading Station and other web trading platforms, and some of them even have a connection to better technological solutions to ensure complete functionality.
PAMM means Percentage Allocation Management Module, with it the trading is developed as in an individual account but the benefits are divided according to the percentage of the total funds that each account represents. For example:
The total managed funds are 10,000 USD, which are divided as follows:
Account A: 2000 USD = 20% of the account
Account B: 5000 USD = 50% of the account
Account C: 3000 USD = 30% of the account
And let’s suppose the manager opens a position which gave 500 USD of net profits:
Account A will obtain 100 USD of profit or 20% of that 500 USD
Account B will obtain 250 USD of profit or 50% of that 500 USD
Account C will obtain 150 USD of profit or 30% of that 500 USD
Money managers will also charge Performance fees for their services (20-30% on average), and these fees will be deducted from the profits earned.
The same logic applies to losses and the amount of margin taken from each account to open each position.
With the Lot Allocated Management Module, the sub-accounts have a designated fixed number of lots to be traded each time the manager opens a position, the number of lots is determined when the contract and terms are discussed. For example:
The total managed funds are 10K USD, which are divided as follows:
Account A: 2K USD with 3 lots to be traded each time
Account B: 1K USD with 2 lots to be traded each time
Account C: 1K USD with 1 lot to be traded each time
Account D: 4K USD with 0.5 lots to be traded each time
Account E: 2K USD with 4 lots to be traded each time
Let’s suppose the manager buys EUR/USD which when closed give 100 USD of profit per lot, the profits will be divided as follows:
Account A obtains 300 USD of profit. 3lots x 100 = 300 USD
Account B obtains 200 USD of profit. 2lots x 100 = 200 USD
Account C obtains 100 USD of profit. 1lot x 100 = 100 USD
Account D obtains 50 USD of profit. 0.5lots x 100 = 50 USD
Account E obtains 400 USD of profit. 4lots x 100 = 400 USD
With this allocation method, the profits, as well as the risk, are not proportional to the total funds, and for each sub-account, the owner decides how much he wants to risk regardless of the percentage of investment made.
With managed accounts, there’s no need to worry about what moves financial markets and why. All you have to do is to set the parameters for the account (e.g. the appropriate risk) and enjoy the ride.
That is if there’s a profitable strategy. Managed accounts do not offer a guarantee of a profit.
Can I adjust the risk in a MAM account to suit my risk profile?
Yes. One can choose to trade only fractions of the volume in the main account or be more aggressive.
Are all managed accounts the same?
No. The strategy involved differs from the markets to invest in the time horizon for a trade.
What should I look for before investing in a managed account?
Historical data and investment strategy.
Do all Forex brokers offer managed accounts?
No, but you can find a good selection in this article.