Are PAMM accounts safe? Managed Accounts Analysis
When we talk of Forex managed account services, most people who are not familiar with how PAMM accounts work tend to ask this question in their minds. ”Are PAMM accounts safe in the first place?”
The answer is yes they are safe but the opposite can also be true depending on how the PAMM account is set up and who is managing it. (London PAMM investors can read the article below).
Secondly, you need to realize that safety in this context can mean two things; either the person shooting the question wants to know if they can make a profit consistently or if Forex managed account services is a hoax.
Either way, we can use the term ”safety” when referring to PAMM accounts and the security of our money.
So if you have been concerned with the question of whether PAMM accounts are safe, this article will help address the question in an in-depth and open-minded way. In the end, you’ll decide whether Forex managed account services are the real deal.
Are PAMM accounts safe?
First of all, I will address safety from the perspective of an experienced trader who has a track record of achieving consistent gains over time.
If a trader can demonstrate consistency over a period of time and they told you they can trade and make profit with your money, then definitely you will make money from this trader. I cannot think of any reason that can make a high achiever in Forex trading start losing money.
And even if they were trading with billions of dollars in client funds (like we do), they would still use their skill to trade safely and profitably over time.
So, are PAMM accounts safe when you use Forex managed account services from a qualified trader? A big resounding yes would be my answer.
How PAMM or MAM accounts work
The first thing you have to understand is how a PAMM account works.
An experienced trader sets up a master account and funds it with their own money. I funded ours because that was the first condition for successfully opening a PAMM/MAM Forex account.
After the paper work was done and everything was running, we got clients to start depositing money into their accounts which we would then link with our PAMM account (master account).
This is called pooling of funds. All funds are ”pooled” into one account (including our own money) and traded as one account that has the sum total of all clients’ funds. Further reading can be done here.
These clients accounts are called sub-accounts and whatever happens in these accounts are a reflection of what happens in the master account.
With this kind of setup, we do not have direct and full control over anyone’s funds. The only control that we have is that which allows us to trade the account from our master.
We have no ability to deposit or withdraw money from our clients’ accounts. That facility is not offered where our PAMM account is hosted at.
We may offer a gateway through which funds reach the PAMM account quickly. But there is no way to access these funds directly, and so you can see that even if we wanted to steal your funds (I can’t think of any reasons why we can do that), it would be impossible to fulfill that mission.
Forex Managed account services as a business
I mentioned earlier that one of the conditions for opening a PAMM account with our brokerage is that we should fund it with our own money.
The second condition is that we should have a verified track record of successful trading.
I mean, you cannot just wake up one day and open a managed Forex account like that. You need to prove to the operators that you have been trading successfully over a period of time.
The fact that we were able to satisfy the two conditions (of course our determination to offer Forex managed account services that offers good returns motivated us), means that we were serious about building a sustainable business.
Someone who has a solid track record of trading profitably over time wouldn’t ruin this record in one night. Similarly, we don’t see how we can destroy this business when it took us hard work to setup a PAMM and trade our clients funds therein.
If we ruined our Forex managed account services today, all of our clients would withdraw their monies and we would lose our commissions. I don’t think any serious money manager wants that to happen to their business.
So, are PAMM accounts safe? The answer is yes if the service is offered by a serious money manager who knows that part of his income is made from trading his clients’ money.
Also, remember that our own money is involved in this operation. We are literally putting our mouths where our money is. If we record losing trades month after month, we are also losing our money in addition to those of our clients.
Can you lose money from a Forex managed account services?
It’s possible that people can lose money but this is highly unlikely if the investor has put his money into a fund that is managed by an experienced trader.
There is another kind of PAMM account that is not safe. This kind of service is mostly offered by individuals who cannot demonstrate their trading prowess and risk management practices.
They can easily defraud you since they are often working with shady brokers who are related to them in one way or the other.
Therefore, if someone boasts of their trading success and they can’t provide verified trading stats showcasing their expertise, you have the right to run away as fast as your legs can carry you.
Are PAMM accounts safe? Definitely they are safe if they are setup in the way they should work.
Of course the safety of your money is also dependent on the experience of a trader and their style of trading. We are conservative in our trading and so we will never put your money at risk. If you want to get started with our Forex managed account services, please contact us for more info.