There are really lots of options available when it comes to forex trading. The evolution of different flexible trading systems has really made trading easier and more convenient. Two of the most frequently-used systems include the PAMM system and the Trade Copier.
The PAMM system
PAMM stands for Percentage Allocation Money Management. A PAMM account is a kind of trading option which consists of three parties – the investor, the broker, and the fund or trading manager. With the PAMM system, the investor set up a trading agreement with a money manager through the broker to trade on their behalf. Thus, the role of the investor is reduced to providing the capital while the actual trading is done by the money manager who trades according to their experience and capacity.
- Investors do not require any Forex training to open and set up an account. This can help save a lot of time and effort.
- A PAMM system is likened to be a silent partner and is a simple and hassle-free way to engage in Forex trading.
- As an inexperienced investor, you are adopting the skills and expertise of a seasoned trading manager which could increase your likelihood of success.
- PAMM accounts are most efficient for investors are busy with other commitments and want to maintain a hands-free trading system.
- Potential loss can be reduced at the beginning of the trade especially if you are a novice and don’t have the time to study the trading system.
- All trade risks and errors fall on the investor. The brokers and traders will not assume responsibility.
- The most competent traders usually charge higher fees and ROI.
- As an investor, you will have practically no control over the transactions that are made.
The Trade Copier
Trade Copier is yet another popular form of Forex trading whereby the investors directly replicate or copy the trades of successful traders. The key elements involved in the Trade Copier system includes the broker, trading platform that allows copy trading, and another trader from whom the trades are copied.
- Investors have the ability to follow, monitor, and adopt the trades of expert Forex traders that are successful
- In copy trading, the system automatically executes your choice making the workload very light.
- No special trading knowledge is required since the key decisions are made through the trading platforms and copied from the same signal provider.
- You have full control over your trading parameters and can change it at any time.
- Investors are fully dependent on the success of other traders. This is not something that is always guaranteed.
- Although you don’t have to trade yourself, you still require basic forex knowledge to be able to analyze processes and interpret results.
- Copied orders usually take longer time to execute.
Which is better?
Before we conclude on which system is better between the PAMM and copy trading, we must first acknowledge the basic similarities between the two. They both allow the investors to dedicate little or no time to trading. Thus, the key to selecting the better system depends on the preference of the investor especially on the degree of control you want over your investment. PAMM system offers limited control while copy trading gives you minimal control over the trades.
Consider the advantages and disadvantages of both trades and choose the trade that best suits your trade goal.
Bill Adams has been into currency trading for over 5 years. After taking a short course about Forex and Cryptocurrency, He decided to put his knowledge to good use as a writer and trader to good use. His Educational background in Business Administration and Economics has given him a broad base from which to approach Forex and Cryptocurrency topics.