If we define PAMM accounts in one line, it would be “an agreement whereby two parties that are expert money managers and investors agree to work for each other on some specific working mechanism.” everything about Alpari PAMM you can read at partner website.
One party that is investors is usually the one that has limited knowledge about Forex. It could be due to lack of time or even lack on personal interest. We welcome them in PAMM accounts, through which we try our best to secure their investment and make them profitable. The person who handles all their investments is known as PAMM manager (you can read more how you can become PAMM manager in Instaforex review). It is then a complete responsibility of a manager to manage all the cash in and outflow. If the manager does for what he is acquired, then he is liable to receive some remuneration from investors.
Below is a step by step guide on the working mechanism of PAMM accounts.
Step 1: To get started, there are mostly 3 persons involved in the whole process. The first one is manager, and the other two are the investors.
For example: Smith, who is expert in forex trading, decides to increase his income by starting an account in PAMM. Initially, he starts with the funs of $2,000.
Next, Smith contacts the two investors to attract them towards his investments through PAMM. He makes a success and the two investors Johnson and Jackson invest $3,000 and $5,000 respectively. After their investments, the total current balance of PAMM accounts raises to $10,000.
Step 2: The first step usually takes a month, after which begins the step two. At the start of second step, manager Smith reports that he gained $5,000 on his total investment. After this achievement, total balance rises to $15,000.
The initial profit of $5,000 is then distributed between the two investors. The first investor Jackson gets a total of $2,500, which is 50% of his initial investment. He is liable to pay 20% of this shared profit to the manager Smith, which is $500. On the other hand, a similar situation happens with the second investor. Johnson gets $1,500 from which he pays $300 to the manager as a part of his reward.
Step 3: At this stage, the manager Smith decides to withdraw his profits. After that both the investors decide to reinvest their total investment, which also includes their profit. Yet again, they choose PAMM accounts for their investments.
At the start of second month, another investor Ford joins the party of PAMM accounts through his investment of $1,000.
Step 4: This last stage comes after the second month of investments. The second month shows double profit than the first month, which raises the total account balance from $14,000 to $28,000. Yet again, the profit is decided among investors.
At the end of second month, the profit figures are as follows:
• Jackson: $5,600
• Johnson: $3,200
• Ford: $800
• Smith: $4,400
This little piece of information shows how easily an investor achieves his desired profit through PAMM accounts.