MAM/PAMM Vs Copy Trading – Which Is Better?

Managed forex accounts are investment accounts where the account holder entrusts a professional money manager to trade on his/her behalf. This allows investors to leverage the skills of a professional trader to make profits on their accounts. Though there are different types of managed accounts available, the two most popular ones include MAM and PAMM accounts.

MAM: MAM stands for multi-account management. It is a system that enables you to connect multiple individual accounts to one main account, known as the master account. This means any trades placed on the master account will be replicated across investors’ accounts. This way, the money manager can allocate trades to each investor account. Originally, MAM was developed for money managers to automate trading across several accounts, but these days, this has been widely used for managed forex accounts. The money manager makes important decisions like when to enter a trade and when to exit, while investors only need to specify their risk tolerance and the amount they are interested in depositing. Moreover, it should be noted that although money managers get the power to make trades on investors’ accounts, they are not granted permission to withdraw funds. This is one of the biggest factors when it comes to trust and reliability of managed accounts.  To make sure the money manager’s trading strategy isn’t messed with, investors’ accounts are set to “read-only” mode. This means investors can’t trade on the account, ensuring that the account is protected from risks and keeps things running smoothly.

PAMM: PAMM stands for percent allocation management module, but how does this system work? Let’s find out. Funds of investors are pooled together in a separate trading account in the PAMM trading account, and a skilled money manager takes charge of handling all those funds. The idea behind PAMM accounts is similar to MAM accounts, which is to let experienced traders manage the trading account and generate profits. It’s a safer and more efficient way for beginners to start trading in the forex market. The most important thing to note when it comes to PAMM accounts is that trades are not executed directly in the investors’ individual accounts, but they take place in the aggregated account managed by the money manager. This way, the profits generated from trading are distributed proportionally among all the investors involved. This setup allows even those with smaller amounts of money to jump into PAMM accounts and benefit from the trading expertise of professionals. 

What is Copy Trading?

Copy trading is a unique trading strategy in which you can connect your trading account with that of a professional trader’s account of your choice, and their trades will be copied onto your account automatically. The condition is that professional traders should be willing to share their trades for copy trading. Therefore, you should check social trading websites to find such skilled traders. Many copy trading platforms have a whole database of verified copy traders with all sorts of stats for each of them, like their ROI, Maximum drawdown, winning percentage etc. It’s a real advantage because instead of searching for trustworthy money managers yourself, the platforms take care of that for you.

f copy trading interests you, you would be glad to know that the two most popular trading platforms, MT4 and MT5, which besides offering useful trading features, also have their own built-in copy trading services. You can find loads of traders there who have made their trades public for other traders to copy. You can choose the traders you like and decide how much you want to invest with them. You can even follow multiple traders on one account, which is different from MAM or PAMM accounts.

The great thing is you have control over your own trades too. You can trade on the same account, close positions opened by the signal providers, and basically do what you want without limitations. The results you get on your account might be different from the signal providers because you manage your money separately. The providers are responsible for their own results, and different investors can use their signals in different ways. Another best thing about copy trading is that some platforms even let you interact with the providers directly. You can chat with them, ask questions, and comment on their strategies.

Difference Between MAM/PAMM & Copy Trading

Managed forex accounts and copy trading are two great ways to make money from trading without actively doing all the work yourself. They have a lot in common and can be effective if you use them correctly. Many trustworthy brokers offer managed as well as copy trading accounts. So, as an investor, it’s important to do your research and make sure you choose a reputable broker. Once you’ve found a reliable one, you can start exploring managed forex accounts and Copy Trading, but before that, let’s understand some common differences between MAM/PAMM and Copy trading accounts:

1. With a copy trading account, you have the power to make your own decisions. You can choose which traders you want to copy and which trades to follow. It gives you more control and flexibility to customise your trading strategy based on your preferences. On the other hand, PAMM accounts work differently. When you open a PAMM account, your money is entrusted to a professional money manager. They will handle your funds and make the trading decisions on your behalf. You won’t have direct control over which trades are opened or closed.

2. In PAMM accounts, there’s this pool system going on. The profit you make is divided based on the percentage you allocate. So, if you invested 10% of the total pool, you’ll get 10% of the profit. It’s all about your share in the pool. But in copy trading, your profit depends on how well the person you’re copying performs. You’ll get a share of that success if they make good trades and rake in profits. Moreover, even if there are other investors copying the same person, it doesn’t really affect your profit. You’re not part of a pool in that sense. Your profit depends solely on the performance of the individual you’re copying.

Which is a Better Option for Traders?

Both options have their pros and cons. There’s no one-size-fits-all answer to which one is better. It really depends on you as an investor and what you’re looking for.

Think about your own personality and trading style. Are you someone who wants more control and decision-making power? Or do you prefer to let professionals handle things for you? That’s an important factor to consider.

If you prefer to have a more hands-on approach and want to be actively involved in the decision-making process, copy trading is the way to go. But if you’d rather leave the trading decisions to a professional and have them manage your funds, then a PAMM account might suit you better.

Also, look at the trading costs and what the brokers offer. Compare the fees, commissions, and additional charges for each option. It’s always good to be mindful of those financial aspects.

Ultimately, it’s about aligning your choice with your goals and preferences. Whether you go for managed accounts or copy trading, ensure it fits your needs and helps you achieve your goals. It’s your money and your investment journey, so choose wisely and trust your instincts.

In The End

As you can see, there are multiple options for entering the forex market, no matter your experience level. You can have your accounts handled by a professional trader or just copy their trades on your account; it all depends on how you want to approach trading. The only thing you need to make sure of is that the broker you are planning to choose or have already opened an account with must support these innovative trading methods.