Trading forex in this era is not what it used to be like in the past. Practically speaking, any person who wishes to engage in the forex trading industry can do so by just requiring an internet connection and a forex trading Account. Now with so many people involved in the trading industry, the need to stand out and perform substantially better than others has become mandatory. Traders, whether amateurs or experts are looking for ways to ace in the market. This type of competition among traders has given birth to the innovation of various trading tools and strategies that a trader can opt for as per his needs and goals. 

To reduce the possibility of risks and potential of losses, different types of managed accounts have come into play. One of the most talked about managed accounts are PAMM , MAM and the concepts of copy trading. All traders who want an effective risk management or those who are too occupied to trade themselves can avail the benefits provided by accounts such as PAMM forex accounts. 

Working of a PAMM account in Forex Trading 

In forex trading PAMM stands for percentage allocation management module. A Pamm Account is a unique innovation of the forex market that allows a trader to earn substantial profits without having to trade himself. A PAMM account in forex refers to a type of managed account where forex brokers allow their clients to allocate funds with a fund manager who manages multiple accounts at once. This process simultaneously puts the funds to use and also divides risks across multiple investors. A PAMM account replicates the trading option created by the forex traders and allots various managed accounts based on the decided percentage. 

Participants in the Setup of a PAMM Account

There are usually three participants involved in the setup of the PAMM account:

1. The forex broker.
2. A manager of funds who is responsible for the allotment of these funds to trades.
3. An investor who is actively involved in the distribution of funds to the trader. 

Advantages of a PAMM account in Forex Trading:

• A PAMM account has no limitations on the number of traders who are willing to join as management of multiple accounts is possible at once.

• Many new traders prefer the PAMM account in forex trading due to the presence of a large number of professional and expert traders.

• The PAMM account is a secure option for traders because the manager does not have direct access to the account. 

• A PAMM manager can not perform any unwanted action as this will also put his own capital at risk. Therefore, it is considered as one of the safest options to use.  

Drawbacks of using a PAMM Account in Forex

• Most of the time it becomes difficult for a trader to know the strategies of a PAMM manager as the nature of this type of account is closed in nature. 

• Traders are at a risk of suffering potential losses if the broker does not allow the account manager to set a maximum loss limit. 

Working of a MAM Account in Forex

MAM stands for multi account manager. This type of account allows traders to position their funds with experienced traders who then trade on their behalf. A Mam Account provides more flexibility to the fund manager for the allocation of funds and management of risks. A MAM account in forex allows the fund managers to gain complete access to the investors account and does not require any log in or fund withdrawal permissions. In a MAM account system the strategies planned by the fund manager are replicated across an accumulation of funds from multiple traders depending  on the risk appetite and preference set by the trading manager. 

Steps to Open a MAM Account

1. Choose a Broker- The first step is to choose a broker that you want to work with. The broker should be regulated and be able to provide a safe and transparent trading platform. 

2. Apply for a Trading Account- A trader can easily apply for a trading account after picking the broker by submitting the necessary documents required by the broker such as an identity proof.

3. Pick a Fund Manager- A trader should pick a fund manager who has a clean, reputed and successful track record over the years. 

4. Set your Criteria- If you want the fund manager to get an insight into your trading needs and strategies, you do so by customizing your MAM account and reflecting your trading accounts. 

Benefits of Using a MAM Account:

• Management of various accounts is possible by one click.
• A trader can easily handle and manage diverse fund allocations including lot, equity, percentage and balance. 
• A trader can start trade sizes as low as 0.01 lots with the help of a MAM account. This feature generally benefits new traders for better trading. 
• There are no limitations on the number of deposits and the trading accounts wanting to associate with a MAM account. 

Drawbacks of a MAM account:

• New traders find a MAM account helpful but they depend on it for so long that it reduces their learning capabilities and makes them dependent on the account manager for running their trade activity.

• Certain restrictions are imposed on a MAM account as once a trader deposits funds into it, it becomes difficult for him to gain access or make early withdrawals. 

• Some amount of fee or commissions are deducted from the profits made by the trading strategies of a MAM account manager.  
• A trader is bound to pay a penalty for making early withdrawals.  

Understanding Copy Trading

Copy trading is an innovative process used by less experienced traders in the forex market to directly copy and manage trading positions opened by other experienced traders. The strategies of copy trading are popular among novice traders as they are able to earn a substantial amount of profit while still learning the know-how of the forex market. The experienced traders who’s strategies are being copied by other traders are provided with a commission or fee, some traders however, do not charge any amount at all. Copy trading techniques have gained popularity over the years and due to its presence many new people are eagerly joining the forex market.

Steps to open a Copy Trading account

1. Open an account- Create an account by registering on a copy trading platform.

2. Select the Best Trader- After registering on a copy trading platform, a trader should then browse through the best traders tab and carefully evaluate his trading strategies and requirements. 

3. Pick the Trader- Hit the follow button on a trader’s profile who you feel matches all your trading requirements and strategies efficiently.

4. Start the process- After you hit the follow button once again, you will receive a pop up notification acknowledging your follow request. Your copy trading process has now begun. 

Advantages of Copy Trading:

• Copy trading is one of the easiest approaches to forex trading as a trader does not have to keep a continuous watch on the market analysis, watching charts or upskilling their strategies. They can simply copy trade the strategies by this process.

• A novice trader can earn a substantial amount of profit while still learning to trade by the help of copy trading.

• Copy trading provides a lot of flexibility to a trader as it allows him to pick his own strategies and enables him to modify accordingly.

• Copy trading is very beneficial for novice traders as they can trade just like professionals without having years of experience on their plate. 

Drawbacks of Copy trading 

• Copy trading somehow makes a novice trader dependent that shortens the learning curve and hampers independence. 

• It is not necessary that an expert trader will always earn profits and his trading strategies will never fail. If an expert hits a downward trajectory, a trader might suffer the same repercussions as him. 

• It is not always necessary that the trading goals and strategies of a trader would match with that of an expert. 

As a trader you should choose a type of managed account that suits your preference and risk appetite. Always do some research on these types of managed accounts before opting as it might help you in drawing conclusions about what to choose and how things might work in your favor.