Successful trading requires self-discipline and persistence, generally taking years to master.
That’s why managed trading accounts exist, a service that provides access to consistently successful traders offering clients the option of having their accounts managed.
Therefore, if you are a MAM (Multiple Account Manager) or PAMM (Percentage Allocation Management Module) manager charged with handling the funds entrusted by clients, the bar is typically set high.
Understand and Manage Conditions Effectively
The way MAM and PAMM accounts work is investors grant fund managers the power to trade on their behalf, by way of a limited power of attorney. MAM/PAMM master accounts come with unlimited trading accounts. A money manager, for example, may establish a micro lot account to limit the size of the positions opened on this particular account. The power of attorney gives the manager the freedom to invest the investors’ funds as they see fit.
While PAMM accounts allocate trades based on the % of total account equity, MAM accounts offer more flexibility when sub-allocating trades in the master account. For example, the option to allocate trades based on a fixed-lot basis exists; MAM account managers can also assign higher leverage to sub-accounts.
Another important aspect is the performance fee percentage. In other words, how profit distributes between the investors’ sub-accounts and the fund manager. Setting these options in a sweet spot that maximises your profit while giving investors enough incentive to invest with you is a large part of money management.
A successful MAM/PAMM manager instills confidence in prospective investors. Providing the necessary information to clients gives them peace of mind and the transparency will entice other investors.
Concealing details or having an attitude your trading is a black box no one else is intelligent enough to comprehend will fail to captivate serious investors. That is not to say you should reveal all your secrets. You can keep investors informed without revealing your entire trading system. Put another way, disclosing each trade in real-time does not entail demonstrating your entire thought process. Features such as live order management automate this.
Put your money where your mouth is|
This expression first appeared in America in the 1930s or 1940s. The idea behind this idiom is it is easy to talk about doing something, but it is harder to do something about it.
Nothing imparts more confidence among investors than someone willing to put their own money into their fund.
As a multi-account manager or PAMM manager, investments as small as $1,000 go a long way toward establishing confidence in your intentions.
Ensure the broker you choose has a trading platform you like and are comfortable operating. Using a broker offering poor execution or one that manipulates orders hurt not only you but the investors in your fund as well.
Choose a broker that offers a high degree of control over your MAM account or PAMM account. Selecting a broker that allows Expert Advisor (EA) activity is good for any modern Forex trader.
You should also put a premium on respectable order execution, as slippage can become a significant factor if trading large orders. Order management monitoring is also a fantastic feature for MAMs and PAMMs, aiding transparency, and providing more appeal to potential investors.
A Robust Trading System
The best money managers develop their trading systems. EAs have their place, though to excel as a fund manager you should be able to develop the same strategies EAs use, understand each type of order available, and recognise when to use them.
A robust trading system involves having a defined entry point, take-profit point, and stop-loss order level. These parameters must be defined for each trade. Trading Forex without a stop-loss order is considered risky by most, particularly with client funds. Setting a stop-loss order forms part of basic risk management and is vital to successful trading, regardless of the account size.
Various trading styles are used by successful MAM/PAMM account managers. Whether your trading strategy involves a fundamental or a technical approach makes little difference, provided it works. However, the best strategies tend to encompass both. Fundamental strategies may ignore timing signals that could add a lot of value to trade, while technical strategies may overlook upcoming hurdles, due to being hyper-focused on previous price movement. A combination of the two, therefore, tends to work well.
Risk Management and Trade Management
Good rules of thumb such as never entering a trade that has a reward to risk ratio of less than 3:1 is generally followed.
Trades with more than 33% risk mean you will need to be right more than 25% of the time to break even. In Forex trading, battles are won in the long haul by drawing on statistical advantages that present themselves in the market.
Money managers are typically prudent Forex traders who attain profits methodically.
Set daily loss limits and stick to them. Even the best professional traders have off days. You must set a limit for your daily loss and walk away when you exceed it. Don’t let your ego lead you (and your clients) into ruin.
Reaching halfway between the take-profit order and the entry point, traders may consider reducing risk to break even. A trailing stop, if your broker’s trading platform supports it, will similarly hold you out for potential profit while guarding against losses.
Reputable Trading Software
MetaTrader 4 is not as current as MetaTrader 5, though remains the more popular of the two, due to the code that was written for MetaTrader 4 not being compatible with version 5. MetaTrader 4 gives you a powerful leg up on anyone who is not using it.
A money manager has the option of easily executing block orders with a click of the mouse, making MetaTrader 4 an invaluable example of MAM software.
The Economic Calendar
Even if you have a high-performing strategy, news events may derail a signal. Remain cognisant of major news and key speakers. An off-the-cuff remark from a regional Fed director or an impromptu speech by a member of a Central Bank could have a major impact on any number of currency pairs.
A variety of sites offer economic calendars. MetaTrader 4 can also be configured to keep you aware of these events. At times, news events will mean trading conditions are not suitable, even if the ego says otherwise.
The responsibility of managing your own Forex account is significant. Investing funds for clients, nevertheless, is another level of accountability.
Taking the challenge seriously, applying good fundamental and technical analysis, as well as solid risk and trade management, you can come through for your clients and achieve success.
Manage Funds Professionally with the FP Markets MAM/PAMM Account
Customise your trade management with the high-performance multi-account management solutions provided by FP Markets. Professional fund managers who partner with us for MAM/PAMM account solutions get award-winning services, provided since 2005.
Other reasons to choose FP Markets MAM/PAMM account solutions:
- Customise trading conditions.
- Quick deposit and withdrawal for uninterrupted trading activities.
- Transparent calculation of fees and commissions.
- Be a part of the FP Markets Money Manager Program.
The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation, or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com, and should be considered before deciding to deal with those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.