Questions on PAMM accounts

Dear fellow members,

I am planning to set up PAMM accounts for providing managed fund service with EAs. I got a key question which would like to clarify.....

I understand that PAMM framework allows trades to be made on the master (or manager) account and allocate the profit/loss to the investors' accounts based on percentage of equity or pre-defined lot size. If I have a system which requiers minimium capital of USD5K. Let's say the managers' own capital is USD1K, Is it possible for the manager to invite 8 members with capital of USD500 each and accumulate the fund in the manager account for trading then share profit?

This is very important. If we can reduce the minmium capital requirement on individual investor's account, people can try our system at lower initial risk.

Thanks in advance for your help. 😄

Cheers,

Wallace

Insta forex will give you most flexible leverage on PAMM account as like $1 USD and leverage 1:1000. But the problem is it only have 4 digit platform.

While Alpari NZ also has PAMM account, but manager capital required 3k USD and leverage is 1:100.

You can set the minimum capital to invest and probably has to manual close down the public invest function if just want to limit 8 investor.

Hi DoubleTrap,


Thx for your comment.

I didn't mean to limit the total traders to 8. I would like to know if I am able to group the investors fund into the manager account (no actual fund transfer, of course) so that the manager account can accumulate sufficient capital for the EA to trade.

Cheers,

Wallace

That's the idea of Instaforex PAMM-account, you register as trader, maybe write where to see the performance of the EA (demo or centsaccount) and registered investors are free to invest in your account with whatever amount they choose to from 1$ (or your minimum) to thousands. Everytime an investor wants to put in money you will get an email, and you have to accept or deny the investment for whatever reasons. This means that investors money are pooled, and profits are shared according to how big a part of the pool the individual investor has contributed with. Try the PAMM-monitoring in Instaforex website, and check the history investments of some of the PAMM-accounts. That probably makes it a little clearer.

Cheers

Soeren

Hi Soeren.

Thansk for your clarification. So, for example,

If my system needs a min. deposit of USD5K to run on an individual account. By running a PAMM account, I can run this system on my platform with USD500 only provided that I can gather 9 investors to join?

That means I will see my manager account balance is USD5,000 instead of USD500? 😕

Cheers,

Wallace

Yes

I think that one of the very nice things about Instaforex PAMM-monitoring is that you can see both Balance and Equity in the same diagram, profit percent in one and all current and history trades :)

Cheers

Wallace,

Its never quite as simple as that.

You get two flavours of PAMM account. All work on the same line, with sub-account and a master account that you trade.

The first kind is where the sub accounts are actually linked and when you make a trade, the server will distribute the trade size according to the capital in the account. This would be subject to minimum trade sizes and it is difficult to trade big account with small account, especially if the min trade size for a sub account is 0.1 lots.

The second type is probably what you are looking for where the fund are actually transferred to the master account by the broker. The results of trading activity is then re-distributed to the sub accounts. The benefit of this type of system is that there is no problem with big and small accounts as the sub account is not subject to trade sizes.

The second type you will find at Forex.com, although I would not use them given their recent exposure for dishonest trade practices.

A further hinderance that you will encounter is that many of these systems cannot handle depositing or withdrawing of funds between the sub and master accounts if there is any trades open. By the sounds of it, you will be running some form of long term trade holding system(grid) and this will be a big consideration for you.

Wallace posted:
    Hi Soeren.

Thansk for your clarification. So, for example,

If my system needs a min. deposit of USD5K to run on an individual account. By running a PAMM account, I can run this system on my platform with USD500 only provided that I can gather 9 investors to join?

That means I will see my manager account balance is USD5,000 instead of USD500? 😕

Cheers,

Wallace

Hi Wallance,

You are right! You can gather as many investors as possible and each of is allowed to provide you(invest) with same or different amount of money. At the end of the day, every investor will receive their profit according to their percentages of investment.

My advice to you: If your strategy require USD5k to work properly then Instaforex PAMM is not suitable for you and your investor. The reason is your investors can withdraw their money anytime they like without your permission and any amount as well. This is true because i already double checked with their live support.

Hope you gain something useful.

Regards,
SIM

pip2cash posted:
The reason is your investors can withdraw their money anytime they like without your permission and any amount as well. This is true because i already double checked with their live support.

I am sorry, I would dispute that. They may not need your permission but they probably need the account to be flat ie no trades. The system cannot work otherwise. You cannot simply start removing equity if the system is in drawdown. The trades need to be resolved.

Thanks for all your feedback.

Is it possible for the manager to define a period in which investors cannot withdraw fund from their accounts. Just like most of the investment fund which have a lock in period?

Hi Kennyhubbard, do you know which type of PAMM account Instaforex is running? Anyway, I have sent an enquiry e-mail to their support team for clarification.

Thanks and regards,

Wallace

compuforexpamm posted:
    

pip2cash posted:
The reason is your investors can withdraw their money anytime they like without your permission and any amount as well. This is true because i already double checked with their live support.

I am sorry, I would dispute that. They may not need your permission but they probably need the account to be flat ie no trades. The system cannot work otherwise. You cannot simply start removing equity if the system is in drawdown. The trades need to be resolved.

Do you mean that if there is any floating order in that trader account, then nobody can withdraw any amount of money? Including the trader and investors?

Are you sure?

Thanks,
SIM

compuforexpamm posted:
    

pip2cash posted:
The reason is your investors can withdraw their money anytime they like without your permission and any amount as well. This is true because i already double checked with their live support.

I am sorry, I would dispute that. They may not need your permission but they probably need the account to be flat ie no trades. The system cannot work otherwise. You cannot simply start removing equity if the system is in drawdown. The trades need to be resolved.

Hi Kennyhubbard, your point sounds reasonable. It may causes risk and difficulties to the manager if investors can withdraw their fund freely without any limitation.

Hi Wallace,

Nope, like you have done, get the info from the broker. Different brokers offer differing levels of PAMM from full service, including sourcing clients to nothing more than basic trade distribution. You will have to investigate each system to see if it fits your requirements.

I will share my finding with you all. Thanks for all your feedback 😄

My experience is limited as I have run with 2 brokers and the above sums up my experience with them. Each time I wanted to add funds, I had to flatten the account which was a real pain if you running any sort of grid.

Other brokers may offer some way around this but once again you would have to extract it out of them and them saying an investor can withdraw when ever they like, may be 'technically' correct, they may still have the practical limits.

One would think they could simply close the orders in the sub-account but many brokers do not support partial closing of orders(which it would amount to in the master account).....its a technical issue which is never a simple thing in Metatrader.

I know you can set a minimum days of investment with a penalty if money is withdrawn earlier.

Regarding the withdrawal of money when in DD it could be solved by using Equity as profitmeasure, that means if an investor deposits money > manager trades > balance goes up, but equity goes down > investor has 'lost' money and will withdraw money with a loss...

Hi, below are my conversation with Instaforex support.

Waiting for response...
For you to connect operator Dmitriy

22:46:42 Alexey: Hello. How can I help you?

22:46:48 You:: Hi Alexey

22:46:58 You:: I have some questions related to PAMM

Joined operator Alexey

22:47:44 You:: I understand that manager can use EA in the PAMM manager account

22:48:03 Alexey: Yes.

22:48:06 You:: Let's say if my system needs a minimium account capital of USD5K

22:48:37 You:: If I only have USD1K, but 4 other investors would like to join my PAMM service

22:49:20 You:: Will the system accumulate their funding into my manager account so that my account can have sufficient capital to trade?

22:49:44 You:: of course, we will share profit/loss based on agreed terms and equity proportion

22:50:10 Alexey: Yes, the funds will be summed.

22:50:22 You:: That's good

22:50:30 You:: that means I will see my account have USD5K?

22:51:02 Alexey: Correct.

22:51:10 You:: That's great

22:51:17 You:: I got one more question

22:51:32 You:: Since my system needs a minmium capital of USD5K

22:52:06 You:: If any investors withdraw their funding without prior notice to me

22:52:35 You:: that may affect my system

22:52:52 You:: and produce risk to the trading group as a whole

22:53:13 You:: Can I specific a lock-in period in which the joined investors cannot withdraw funding within that period?

22:57:11 You:: Hi Alexey?

22:58:18 Alexey: Sorry for your waiting.

22:58:30 You:: not a problem :-)

22:59:06 Alexey: You can set such a period, but anyway investors will be able to withdraw the funds with paying you a certain fee.

23:00:06 You:: I heard that if there is trades open in the account, investors cannot withdraw fund unless all the trades are closed. Is this true?

23:01:20 Alexey: No.

23:01:53 You:: So, even I charge a fee against the traders for their early withdrawal

23:02:03 You:: they can still do that without my permission?

23:03:03 You:: I just worry that if the trader's share of equity is significant, they will produce risk to the group as he or she withdraw the fund

23:03:52 Alexey: Yes they can withdraw any time they want.

23:04:32 You:: is there a max limit on the penalty of early withdrawal?

23:05:11 You:: If I set it to a relatively high level, it can discourage the early withdrawal

23:06:18 Alexey: 10% from investment sum.

23:07:26 You:: This is the maxmium?

23:08:04 Alexey: Yes.

23:08:25 You:: ic, that will be a concern...

23:09:38 Alexey: It is the measure from cheating traders - to protect investors.

23:11:00 You:: ic, but it will be appreciated if there is a lock in period so that the manager can ensure that there is sufficient funding in the group account

23:11:50 Alexey: I'm sorry, but the rules are the same for everyone.

23:12:24 You:: Thansk Alexey

23:12:31 You:: You are very helpful

23:14:10 Alexey: Always glad to help you.

As i thought, Instaforex uses current Equity, not Balance to determine profits...