PAMM Trading
Percentage Allocation Management Module (PAMM) trading platforms have grown in popularity in recent years. Nowadays, PAMM trading is seen as one of the attractive ways to earn passive income online. In this guide to PAMM trading, we explain how different systems works plus the pros and cons for both investors and fund managers.
PAMM Brokers
Here is a short summary of why we think each broker belongs in this top list:
- Dukascopy - Established in 2004, Dukascopy Bank SA is a Swiss online bank and brokerage providing short-term trading opportunities on 1,200+ instruments, including binaries. A choice of accounts (JForex, MT4/5, Binary Options) and sophisticated platforms (JForex, MT4/MT5) deliver powerful tools and market data for active traders.
- xChief - xChief is a foreign exchange and CFD broker, established in 2014. The company is based offshore and registered with the VFSC and FMA. Users can choose between a wide selection of accounts and base currencies, making ForexChief accessible to global traders. The brand also stands out for its no deposit bonus and fee rebates for high-volume traders.
- AZAforex - Established in 2016, AZAforex is an offshore broker offering short-term trading on 235+ global financial markets, including through binary options with payouts of up to 90%. Three accounts (Start, Pro and VIP) offer unique features, but all provide access to the broker’s Mobius Trader 7 platform, which has benefited from performance upgrades over the years.
- AvaTrade - Established in 2006, AvaTrade is a leading forex and CFD broker trusted by over 400,000 traders. Operating under regulation in 9 jurisdictions, AvaTrade processes an impressive 2+ million trades each month. Through like MT4, MT5, and its proprietary WebTrader, the broker provides a growing selection of 1,250+ instruments. Whether it’s CFDs, AvaOptions, or the more recent AvaFutures, short-term traders at all levels will find opportunities. With terrific education and 24/5 multilingual customer support, AvaTrade delivers the complete trading experience.
- IC Markets - IC Markets is a globally recognized forex and CFD broker known for its excellent pricing, comprehensive range of trading instruments, and premium trading technology. Founded in 2007 and headquartered in Australia, the brokerage is regulated by the ASIC, CySEC and FSA, and has attracted more than 180,000 clients from over 200 countries.
- Fusion Markets - Fusion Markets is an online broker established in 2017 and regulated by the ASIC, VFSC and FSA. It is best known for its low-cost forex and CFD trading, although its multiple account types and copy trading solutions cater to a range of traders. New clients can sign up and start trading in 3 easy steps.
Dukascopy
"If you’re an experienced trader, Dukascopy provides the tools you need: JForex for algorithmic strategies, competitive spreads from 0.1 pips, leverage up to 1:200, and the peace of mind of using a Swiss-regulated bank and broker."
Christian Harris, Reviewer
Dukascopy Quick Facts
| Bonus Offer | 10% Equity Bonus |
|---|---|
| Demo Account | Yes |
| Instruments | CFDs, Forex, Stocks, Indices, Commodities, Crypto, Bonds, Binary Options |
| Regulator | FINMA, JFSA, FCMC |
| Platforms | JForex, MT4, MT5 |
| Minimum Deposit | $100 |
| Minimum Trade | 0.01 Lots |
| Leverage | 1:200 |
| Account Currencies | USD, EUR, GBP, CAD, AUD, NZD, JPY, ZAR, TRY, SEK, NOK, DKK, CHF, HKD, SGD, PLN, CZK, AED, SAR, HUF, MXN |
Pros
- Dukascopy offers tight spreads starting from 0.1 pips, leverage up to 1:200 (depending on the jurisdiction), and volume-based commissions that reward high-frequency traders.
- Dukascopy features some of the best research we’ve seen, even a professional TV studio in Geneva covering financial news, market analysis, and daily insights from professionals.
- The proprietary JForex platform is highly advanced, offering tools for algorithmic trading, extensive charting, and access to deep liquidity for short-term traders.
Cons
- While JForex is feature-rich, it has a steep learning curve, making it less suitable for beginner traders who might prefer simpler platforms.
- Dukascopy's withdrawal fees are higher than most competitors we’ve tested, particularly for bank wire transfers, which may deter traders who require frequent access to their funds.
- Some account types, such as the MT4/MT5 accounts, require a higher minimum deposit of $1,000, which may not be ideal for traders with smaller budgets.
xChief
"xChief continues to prove popular with investors looking to trade highly leveraged CFDs on the popular MetaTrader platforms. The broker's rebate scheme and investment accounts will particularly appeal to seasoned traders. However, the lack of top-tier regulatory oversight is a major drawback."
xChief Quick Facts
| Bonus Offer | $100 No Deposit Bonus |
|---|---|
| Demo Account | Yes |
| Instruments | CFDs, Forex, Metals, Commodities, Stocks, Indices |
| Regulator | ASIC |
| Platforms | MT4, MT5 |
| Minimum Deposit | $10 |
| Minimum Trade | 0.01 Lots |
| Leverage | 1:1000 |
| Account Currencies | USD, EUR, GBP, JPY, CHF |
Pros
- xChief offers STP/ECN execution with low spreads from 0.0 pips and low commission rates starting from $2.50 per side
- The low minimum deposit of $10 will appeal to beginners, as well as the beginners’ guides in the Library
- The broker offers several account types to suit different traders, including a Cent account for beginners and pro-level hedging/netting accounts
Cons
- xChief is an offshore broker with weak regulatory oversight from the VFSC, so traders will receive limited safeguards
- The Classic+ and Cent accounts provide access to fewer instruments than the other account types, at 50+ and 35+, respectively
- Fees and minimums are imposed on most withdrawal methods, including a €60 minimum for SWIFT bank transfers
AZAforex
"AZAforex is best suited to active traders looking to make all-or-nothing bets on global markets through binary options and those looking for high leverage up to 1:1000 in return for weak regulatory safeguards."
AZAforex Quick Facts
| Bonus Offer | 25% Crypto Deposit Bonus, 120% Loyalty Bonus, 30% Spread Rebate |
|---|---|
| Demo Account | Yes |
| Instruments | CFDs, Forex, Stocks, Indices, Commodities, Crypto, Binary Options |
| Regulator | GLOFSA |
| Platforms | Mobius Trader 7 |
| Minimum Deposit | $1 |
| Minimum Trade | 0.0001 Lots |
| Leverage | 1:1000 |
| Account Currencies | USD, EUR, GBP, CAD, AUD, NZD, JPY, MYR, IDR, CHF, RUB, THB, VND, UAH, CNY |
Pros
- AZAforex supports a huge and growing variety of payment methods, including bank transfers, credit/debit cards, e-wallets, and cryptocurrencies, providing flexibility for funding and withdrawals. This variety accommodates traders from different regions and preferences.
- Few brokers offer binary options as part of their portfolio. Still, AZAforex includes them, allowing you to speculate on short-term price movements with fixed risk and reward up to 90%.
- AZAforex provides high leverage of up to 1:1000, allowing for potentially greater returns with smaller capital. While this comes with increased risk, it's an attractive feature if you are an experienced trader looking for aggressive growth strategies.
Cons
- While functional during testing, the Mobius Trader 7 platform is proprietary and not widely used by other brokers. This creates risks of potential price manipulation or discrepancies in market data, as there's no external verification like with MetaTrader or cTrader.
- AZAforex offers basic trading guides and a blog but lacks robust educational tools such as video tutorials, webinars, or interactive learning resources. This makes it less appealing for beginners who need comprehensive learning support. A lot of the content is outdated, too.
- AZAforex still operates without regulation from a recognized financial authority, which raises concerns about transparency, fund safety, and accountability. You may have no recourse in disputes, making it riskier than regulated brokers.
AvaTrade
"AvaTrade offers active traders everything they need: an intuitive WebTrader, powerful AvaProtect risk management, a smooth 5-minute sign-up process, and dependable support you can rely on in fast-moving markets."
AvaTrade Quick Facts
| Bonus Offer | 20% Welcome Bonus up to $10,000 |
|---|---|
| Demo Account | Yes |
| Instruments | CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Crypto, Spread Betting, Futures |
| Regulator | ASIC, CySEC, FSCA, ISA, CBI, FSA, FSRA, BVI, ADGM, CIRO, AFM |
| Platforms | WebTrader, AvaTradeGO, AvaOptions, AvaFutures, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade |
| Minimum Deposit | $100 |
| Minimum Trade | 0.01 Lots |
| Leverage | 1:30 (Retail) 1:400 (Pro) |
| Account Currencies | USD, EUR, GBP, CAD, AUD |
Pros
- The WebTrader excelled in our hands-on tests, sporting a user-friendly interface for beginners, complete with robust charting tools like 6 chart layouts and 60+ technical indicators.
- Years on, AvaTrade remains one of the few brokers offering a bespoke risk management tool, AvaProtect, that insures losses up to $1M for a fee and is easy to activate on the platform.
- AvaTrade continues to enhance its suite of products, recently through AvaFutures, providing an alternative vehicle to speculate on over 35 markets with low day trading margins.
Cons
- While signing up is a breeze, AvaTrade lacks an ECN account like Pepperstone or IC Markets, which provides the raw spreads and ultra-fast execution many day traders are looking for.
- Although the deposit process itself is smooth, AvaTrade still doesn’t facilitate crypto payments, a feature increasingly offered by brokers like TopFX, which caters to crypto-focused traders.
- The AvaSocial app is good but not great – the look and feel, plus the navigation between finding strategy providers and account management needs upgrading to rival category leaders like eToro.
IC Markets
"IC Markets offers superior pricing, exceptionally fast execution and seamless deposits. The introduction of advanced charting platforms, notably TradingView, and the Raw Trader Plus account, ensures it remains a top choice for intermediate to advanced day traders."
IC Markets Quick Facts
| Demo Account | Yes |
|---|---|
| Instruments | CFDs, Forex, Stocks, Indices, Commodities, Bonds, Futures, Crypto |
| Regulator | ASIC, CySEC, FSA, CMA |
| Platforms | MT4, MT5, cTrader, TradingView, TradingCentral, DupliTrade, Quantower |
| Minimum Deposit | $200 |
| Minimum Trade | 0.01 Lots |
| Leverage | 1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global) |
| Account Currencies | USD, EUR, GBP, CAD, AUD, NZD, JPY, CHF, HKD, SGD |
Pros
- You have access to over 2,250 CFDs across various markets, including forex, commodities, indices, stocks, bonds, and cryptocurrencies, allowing for diversified trading strategies.
- IC Markets offers among the tightest spreads in the industry, with 0.0-pip spreads on major currency pairs, making it especially cost-effective for day traders.
- As a tightly regulated and widely respected broker, IC Markets prioritizes client security and transparency, helping to ensure a reliable trading experience globally.
Cons
- Despite four industry-leading third-party platforms, there is no proprietary software or trading app built with new traders in mind.
- The breadth and depth of tutorials, webinars and educational resources still need work, trailing alternatives like CMC Markets and reducing its suitability for beginners.
- While IC Markets offers a selection of metals and cryptos for trading via CFDs, the range is not as extensive as brokers like eToro, limiting opportunities for traders interested in these asset classes.
Fusion Markets
"Fusion Markets is a standout option for forex traders looking for excellent pricing with spreads near zero, industry-low commissions and recently TradingView integration. It’s a particularly good broker for Australian traders where the company is headquartered and regulated by the ASIC."
Fusion Markets Quick Facts
| Demo Account | Yes |
|---|---|
| Instruments | CFDs, Forex, Stocks, Indices, Commodities, Crypto |
| Regulator | ASIC, VFSC, FSA |
| Platforms | MT4, MT5, cTrader, TradingView, DupliTrade |
| Minimum Deposit | $0 |
| Minimum Trade | 0.01 Lots |
| Leverage | 1:500 |
| Account Currencies | USD, EUR, GBP, CAD, AUD, NZD, JPY, CHF, HKD, SGD |
Pros
- Fusion Markets continues to impress with its pricing that provides tight spreads with below-average commissions that will appeal to active day traders.
- The market analysis features, Market Buzz and Analyst Views, are great tools for discovering opportunities and conveniently integrated into the client dashboard.
- Average execution speeds of around 37 milliseconds are noticeably faster than many rivals and can help day traders secure optimal prices in fast-moving markets.
Cons
- Fusion Market trails alternatives, notably eToro and IG, in the education department with limited guides and live video sessions to upskill new traders.
- There is no proprietary trading platform or app built with beginners in mind, a notable drawback compared to AvaTrade.
- The demo account expires after 30 days, limiting its potential as a useful trading tool alongside a real-money account.
How PAMM Trading Works
PAMM stands for Percentage Allocation Management Module or Percentage Allocation Money Management. PAMM trading is a form of pooled capital managed trading whereby investors—also called followers—allocate their money to a qualified trader or money manager in desired proportions. These traders can manage several trading accounts at one time using their own capital and the pooled money to generate profits.
Managers distribute the portion of trades according to the percentage allocation. This percentage is defined by the trader in the manager offer—an agreement regulating the relationship between an investor and the PAMM trader managing funds.
Money managers are usually rewarded by charging management fees—taken from investor balances every month—and incentive fees which depend on the profits obtained by the fund manager.
PAMM trading is an attractive option for inexperienced investors who want to benefit from forex or stock trading, for example, but do not have sufficient time or knowledge to commit to the process.
PAMM Trading Example
Let’s say a trader deposits $2,000 and investors contribute their own money to the trader’s PAMM account too. Investor A adds $5,000 and Investor B adds $3,000. The total of the pooled pot is $10,000. The manager keeps trading through the PAMM account using the pooled funds of $10,000.
If the trader makes a 100% return ($10,000), they would take away their $2,000 investment plus $2,000 profit. Investor A would be able to withdraw their $5,000 investment plus $5,000 in profit and Investor B would take their $3,000 plus $3,000 in profit.
However, say the fund manager’s incentive remuneration was set at 25% of the total return, the trader would also benefit from Investors A and B’s profit. The trader would earn $2,500 from Investor A and $1,500 from Investor B, adding a total of $4,000 to the trader’s overall profit.
Setting Up
The trader or money manager opens a PAMM account and meets the minimum deposit requirement, as specified by the broker. The trader must define the terms in the PAMM manager offer such as the minimum investment deposit, time period, and the premium as a percentage of the profit gained.
An investor can analyse a trader’s results through a system that monitors PAMM accounts held with a brokerage. A user can then decide whether to invest with that specific trader or not. New clients can get up and running in a few minutes at top PAMM trading platforms.
PAMM Vs MAM Vs LAMM
MAM (Multi-Account Manager) solutions are a derivative of the PAMM system. MAM accounts allow traders to use the percentage allocation method but provide more flexibility to allocate the trades and adjust the risk of each sub-account based on the clients’ risk profiles.
MAM accounts combine individual trader capital into a large pool of managed funds. However, if you are connected to the master account in the PAMM system, you will achieve the same results in your investor account which is not guaranteed when MAM trading.
Many brokers offer both PAMM and MAMM trading but MAM master accounts are not typically visible on leaderboards unlike with PAMM services.
LAMM (Lot Allocation Management Module) is considered to be the predecessor of PAMM. It does not function according to the size of each investor account. The investor chooses the number of lots that can be traded in the market and the profits (or losses) are determined based on the multiples of lots invested. LAMM trading is best suited to those with more capital.
Benefits Of PAMM Trading
There are several advantages of PAMM trading for both investors and traders:
- Less experience needed – the trader is the one making the decisions but you still reap the rewards of their hard work. Investors can replicate one or more successful trading strategies in their PAMM terminal.
- Access to more capital – PAMM managers gain access to more capital than they would if they were just trading with their own funds. Unsurprisingly, pooled funds often generate more profits than smaller investments, especially in forex trading due to smaller profit margins.
- Hands-off approach – PAMM trading is a good option for investors who don’t have the time to commit to the financial markets.
- Easy to invest – investors can deposit funds into their account once and then allocate those funds across several PAMM trading solutions.
- Joint risk – PAMM traders are risking their own capital as well as their investors’ money. More experienced investors avoid managers that only have a small amount of their own capital on the line.
- PAMM brokers act as guarantors – the obligations made between money managers and investors are often guaranteed by the broker and the master trader cannot disappear with investors’ money. Although capital is managed by the trader, they cannot usually withdraw it.
- Account history – PAMM brokers usually provide a breakdown of a master trader’s track record to help clients find a reliable trader.
- Rewards – profitable traders can receive profits from the management of both their own capital and investors’ funds.
Drawbacks Of PAMM Trading
As with most types of investing, there are some drawbacks to PAMM trading:
- Loss possibility – if a broker doesn’t allow an investor to set a maximum loss limit, the client’s loss can hit 100%, meaning a total drawdown.
- Less learning – unlike with copy trading, investors cannot study a PAMM trader’s investing style, making it harder to develop your own skills.
- Less visible – investors may not know who is managing their capital. It could be either a seasoned trader or a beginner using profitable but seriously risky strategies. It could also be a sophisticated bot developed to partially or fully wipe out investors’ funds after several profitable time periods.
How To Start PAMM Trading
Choosing A Broker
- Regulation – look for PAMM trading platforms that are properly regulated and licensed. We do not recommend trading with unregulated providers.
- Fees – make sure your broker is transparent about performance and fees, including having the full flexibility to deposit and withdraw your funds as needed. Also, customer deposits should be held in your own trading account so that you’re the only person able to make payments.
- Statistics – having access to information and important statistics is vital. You want to choose a PAMM trading provider that offers a service that suits your risk appetite, profile, and financial aspirations. Key information includes the type of PAMM trading system, when it was created, the currency, how many followers/investors the trader has, average win/loss ratio, drawdown, and more.
Choosing A Manager
- Experience – looking at the PAMM trader’s track record will help ensure you find an experienced and established investor. By looking at their history, you can conduct a deeper analysis of their financial results. Ideally, PAMM trading services with 3 or 4 years’ experience are best.
- Maximum drawdown – being able to set a maximum drawdown will decrease your risk exposure. For beginners, we recommend choosing accounts with the maximum drawdown level equal to no more than 40%.
- Profitability – select a PAMM trading provider that balances profitability with your investment style. Profitability is closely linked to your maximum drawdown limit. Accounts where the ratio of maximum drawdown to profitability is no higher than 1:3 tend to perform better.
- Consistency – how consistent is a fund manager’s results? Consistent returns are arguably better than unpredictable peaks and troughs with regular success making it easier to plan.
- Fund manager equity – investors can view PAMM managers’ equity via the broker. Sophisticated investors tend to avoid using PAMM traders who only have a small amount of their own funds on the line. The higher the equity, the greater their personal risk and arguably the more motivation to get it right.
- Popularity – a trader that already manages funds for several investors is a good sign. The best providers are transparent about their current portfolio of clients.
Final Word On PAMM Trading
PAMM trading technology allows investors with a limited understanding of market trends to profit from others’ expert knowledge. But while there are multiple benefits of PAMM trading, beginners may struggle to build their own skills. As a result, it’s important to weigh up your options, including how much time you have, your objectives and your risk appetite.
See our list of the best PAMM trading brokers to get started today.
FAQs
What Is PAMM Trading?
With PAMM trading, your money is handled by a fund manager who places trades on your behalf with the aim of making a profit. Multiple investors pool their funds to maximise returns and profits are distributed equally according to the amount each investor put forward.
Should I Start PAMM Trading?
PAMM trading is growing in popularity. For beginners, in particular, it offers a means of generating income from the financial markets without a serious time commitment. With that said, profits are not guaranteed and you can lose money, especially if you don’t choose a master trader carefully.
Is PAMM Trading Safe?
PAMM trading is offered by many regulated brokers that offer a secure investing environment. However, PAMM trading is not always profitable, and to a large extent, you are at the mercy of the fund manager.
Which Brokers Offer PAMM Trading?
See our list of the best PAMM trading brokers, including reviews, to get started.
What Is The Difference Between PAMM, MAM, And LAMM Trading?
PAMM, MAM, and LAMM are all money management systems. MAM accounts allow managers to assign higher leverage to sub-accounts and are attractive to investors with a high-risk appetite. LAMM is an early iteration of PAMM where a trader is allowed to allocate different lots to individual investor accounts.