PAMM (Percentage Allocation Management Module) is an investment system that allows a professional trader (the PAMM Manager) to manage pooled funds from multiple investors within a single trading account. Rather than each investor trading individually, their funds are combined and traded collectively by the manager.
How It Works:
The PAMM Manager trades using one master account, which includes their own capital and the pooled investments from others.
Profits and losses are distributed proportionally among the investors based on the percentage of their contribution to the total fund.
For example, if an investor contributes 10% of the total pool, they will receive 10% of the profits—or bear 10% of the losses.
This model is called Percentage Allocation because all trade results—both gains and losses—are automatically allocated according to each investor’s share in the account.
Key Features:
Manager’s Incentive: The PAMM Manager usually earns a performance fee or commission based on the profits they generate, aligning their interests with those of the investors.
Full Transparency: Investors can view account performance, trading history, and statistics but cannot interfere with the trading decisions.
Risk Control: Investors choose how much capital to allocate and can withdraw funds based on agreed terms, giving them control over their exposure.
Advantages:
Passive Investment: Investors don’t need trading knowledge or experience.
Diversification: Investors can allocate capital to multiple PAMM accounts with different strategies and managers.
Scalability: One trader can efficiently manage funds for many clients without needing to execute separate trades for each one.
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