Forex Brokers with PAMM or Social & Copy Trading

Another exciting innovation within the FX trading space has been the development of copy trading. First brought to the market by ZuluTrade in 2006, the original model has undergone several modifications to bring the product to its present state. Copy trading is now a recognized avenue for complete forex newbies to start making some good money from their trading ventures in a passive manner. You may call copy trading the passive method of forex investing.

Three terms are used interchangeably to describe the concept. These are PAMM (percentage allocated money management), social trading and copy trading. There are minute differences between all three, so you need to know what these three concepts refer to and how you can distinguish them, so you know what you are delving into. After reading this piece, you should be able to appropriately pick the forex brokers offering PAMM, social trading or copy trading.

What are Copy Trading, Social Trading and PAMM?

Copy-trading is an automated service that allows trades from a master account to be applied to several so-called "slave" accounts so that the same outcomes seen in the parent account are replicated in the slave accounts. The key concept to understand here is that once the service is activated, all trades are replicated from the master account to the sub-accounts in an automated fashion. The only point of control the owners of the sub-accounts have is usually to either activate or deactivate the service and also to close out trades manually on the platform. There is no control exerted at the point of trade commencement.

Social trading is nearly the same as copy trading, with two distinctive differences. Firstly, there is usually some human interaction between the parent account owner and the traders that copy the signals. Secondly, there is an aspect of manual usage, meaning that how social trading signals are distributed to the subscribers requires the latter to implement them manually on their accounts. Thirdly, there is also a measure of social interaction between the signal provider and the subscribers. This is done via a chat box to allow people to exchange their thoughts and ideas.

PAMM is a form of passive investment which involves an investor placing funds into an account that will be managed actively by a proficient trader who owns the master account. A PAMM account is a fund management model in which the account manager does all the work. The account manager must create a PAMM account, place funds in it and trade the account for some months or even up to a year to show trading history. The manager will use the results in the trading history to advertise for investors who will place funds in the account. The manager trades the expanded account, and profits are shared according to the percentage allocation of the invested capital pooled between the manager and the investors. In addition, the manager gets a percentage of any profits from each investor as compensation for the trade effort.

These are the various models by which forex traders can earn passively from their forex capital. Whether the model is to copy trades automatically, implement signals generated from a provider on a manual basis, or earn passively from a PAMM account, forex brokers offer these models on their platforms.

Forex Brokers Offering PAMM, Social or Copy Trading: What You Stand to Gain

There are many benefits to using forex brokers offering PAMM, social trading or copy trading models. A few of these are highlighted below.

A) Faster Pathway to Profitable Trading

A fund manager in the UK that trains traders for prop firms has indicated that it takes an average of 18 months to transform a newbie into a profitable trader. That is to achieve basic level profitability within the FX trading space. Many institutional setups indicate that it can take longer to get a trader to be consistently profitable. Not many people will have the time and dedication to be trained over that length of time to become profitable. There are also those who cannot devote time to trading on their own because of work commitments or health challenges. For these traders, forex brokers offering PAMM, Social or copy trading can be a lifesaver. These systems allow those with trading expertise to make this available to others to use. By using a forex broker offering PAMM or social/copy trading, the pathway towards profitable trading can become noticeably shorter.

B) Profitable Traders Can Add a Second Income Stream

Forex brokers offering PAMM or copy/social trading are not just for newbies looking to earn from the professional trading knowledge of others. They are also for experienced, profitable traders. Such traders can make their expertise available for others to use and earn a second income. Imagine having a subscriber base of 1000 traders paying a small fee to copy your trades, or imagine having a pool of investors in your PAMM account.

C) Diversification

As a passive investor or trader, you can also use copy trading, social trading or PAMM to diversify your forex exposure. You can commit some capital to a PAMM account, create a new MT4 or MT5 account for copy trading with another forex broker offering PAMM or copy/social trading, and trade your conventional account yourself. Since we have several forex brokers offering PAMM and copy/social trading on this website, you can use two or more brokers to create a diversified portfolio. This diversification strategy is great because different copy trading providers or PAMM account managers usually have the assets they prefer to trade. So you ultimately have your capital trading different asset combinations or portfolios within the structure of copy trading or PAMM account management.

Best Practices When Using Forex Brokers Offering PAMM or Copy/Social Trading

While a PAMM account or a copy trading/social trading facility can provide a newbie trader with a faster pathway to profits and other benefits, there are best practices to adhere to if the trader is to get the full benefits of these facilities. Here are some best practices to adopt.

A) Choosing a Proper PAMM or Copy/Social Trading Service

Forex brokers offering PAMM or copy/social trading services will usually showcase several providers on a leaderboard. This leaderboard allows the trader or potential investor to use various analytics to select a service to subscribe to. Making a wrong choice is a recipe for failure. You must know how to use the various metrics in the trading history of each listed provider to assess their performance and know if they will be suitable for you. For instance, one metric commonly displayed for use in selections is the Risk Score. It goes by various names on various forex platforms. The Risk Score measures how conservative or aggressive a copy trading provider's strategy or a PAMM manager's systems are. Does the level of conservativeness or aggression suit your goals? Also, what has been the consistency of the results of the provider or PAMM manager? Will a line graph of profitability show a consistent ascending slope, or will the graph show a zig-zag pattern that indicates an inconsistency in trading results? These are some of the metrics you must consider when making a choice.

B) Proper Risk Management

Sound risk management is the only way to ensure that a losing trade or a sequence of bad trades does not decimate your trading capital. Some copy/social trading platforms allow you to set your risk tolerance and the lot size that can be allocated to each trade. Risk management, in this case, will apply to a copy trading or social trading account, as the application of risk exposure in a PAMM account is not within the subscriber's control.

C) Read the Terms and Conditions Properly

A subscription to a PAMM or a copy/social trading service will involve signing a contract. Read the terms and conditions carefully to know what you are signing up for. Know your costs. Understand what measures of protection you have in case things go south. Always read the fine print behind any subscriptions for PAMM or social/copy trading before you get into them.

D) Calculate Your Expected Returns

If you are a subscriber, using a PAMM manager or subscription to a copy/social trading service will involve some payments. Some services will charge a one-time fee for lifetime subscriptions, while others will charge a monthly fee. You should be able to tell beforehand if the expected returns on your investment will leave you with a profit after removing any subscription fees payable. It is surprising to know how many people ignore this aspect.

Conclusion

Forex brokers offering PAMM, copy trading, and social trading services have provided a lifeline to inexperienced traders, not consistently profitable or do not have the time and resources to trade their accounts. This website provides a list of such forex brokers. Go through the list and visit the broker links to see exactly what is available regarding copy/social trading or PAMM account services. But you be assured that there is a broker for everyone on this site, no matter your aspirations.