Many beginner traders and investors at the start of their independent work on Forex have troubles receiving a stable income. Reliable broker companies always give various solutions for the issue. The most widespread way is to trust the client’s funds to an experiences manager.
Trust management has various names, conditions, and types. There are two main ways of trust management:
· Copying trades from the accounts of more successful traders
· Investment account, usually known as PAMM
Copy-trading: advantages and drawbacks
The first way is copying trades from other accounts; in other words, you receive signals for trade actions from the trader you have chosen. Usually, this is called subscription for trading signals and is a paid service. You either receive a signal via email, or your trading account is linked to the account of the trader you have chosen, so that positions on your account are opened or closed simultaneously with the positions on the trader’s account.
Different brokers provide different settings of such a service. You must study the guidelines carefully and always stick to them.
The advantage of such an approach to investing is the opportunity to choose your trader yourself. If necessary, you can unsubscribe at any moment, opting for a more successful expert – the money remains on your account, and you have full control over them.
One of the drawbacks of the scheme is the possibility that you will receive trading signals when your computer or terminal is off. To avoid such inconvenience, you will have to go into additional expenses and get a virtual copy of your trading terminal (widely known as VPS). Trading terminals on such servers normally work 7 days a week 24 hours a day.
PAMM (Percent Allocation Management Module)
Any experienced trader can open such an account and attract investors’ money to it. The profit received from trading is allocated to the investors, each receiving the percentage of the profit depending on how much money they have invested.
Investors can choose the account of the trader who shows the best profitability during a certain period. The investors decide what sums they invest and withdraw (the profit from trades, a part of or the whole investment).
As with copying trades via trading signals, the risk of the investors is also 100%. The difference is that with PAMM, the investor’s money is given to the trader for a term stated in the agreement, during which the trader can make a series of losing trades, leaving their investors without capital. The only things they can do is stand and watch their deposits vanish.
Summary
Investing in the currency market always means a high risk of losses. Try to diversify your investments between several managers (at least, 4). Keep studying the rating of managers and their strategies. Do not hesitate to change your managers regularly, entrusting our funds to the best, especially that you have such an opportunity every week.
I wish successful investing to everyone!
By Dmitriy Gurkovskiy, Chief Analyst at RoboForex
