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How Does PAMM Work?


PAMM service is an investment service, which provides the investors with the opportunity to earn without trading on the Forex market by themselves, and the managers – to get additional profits for the management of investors’ funds. For clarity let's consider main principles of PAMM-account work by the example, described below.

Creation of PAMM-Account

Manager Ivanov creates a PAMM-account and replenishes it for the amount of $2000, and invites investors Petrov and Sidorov to invest funds for one month, provided that the manager will charge 20% of the profit of investors for the management at the end of the period.

Manager Ivanov
$2000
Total capital $ 2000

Joining Investors

Then Investors deposit the PAMM-account amounting to: Investor Petrov - $3000, Investor Sidorov - $5000. Thus the total capital of PAMM-account is $10 000, where the share of each participant is determined from the formula: participant’s funds / total capital * 100
Consequently the shares of participants:

Manager Ivanov - $2000 (participant's funds) / $10 000 (total capital) * 100 = 20%

Investor Petrov - $3000 (participant's funds) / $10 000 (total capital) * 100 = 30%

Investor Sidorov - $5000 (participant's funds) / $10 000 (total capital) * 100 = 50%

Investor Sidorov
$ 5000
Investor Petrov
$ 3000
Manager Ivanov
$ 2000
Total Capital $ 10 000

Transactions and Mutual Payments

Then, Manager Ivanov makes transactions on the financial markets, result of which increases the total capital up to $20 000. Thus participants receive income proportionally to their participation share within the PAMM-account:

Manager Ivanov - participation share of 0,2 (20%) * total capital 20 000 = $4000, where the profit is $2000 ($4000 - $2000)

Investor Petrov - participation share of 0,3 (30%) * total capital 20 000 = $6000, where the profit is $3000 ($6000 - $3000)

Investor Sidorov - participation share of 0,5 (50%) * total capital 20 000 = $10 000, where the profit is $5 000 ($10 000 - $5000)

Investor Sidorov
$ 10 000
Investor Petrov
$ 6000
Manager Ivanov
$ 4000
Total Capital $ 20 000

Results

Then upon completion of the management period there should be made automatic settlement of payments between the managers and investors, where the investors pay the managers a part of the funds. The following is an example of funds distribution after the settlement of payments, where the manager’s fee on the profit is 20%:

Investor Petrov:
funds at beginning of period - $3000
funds at end of period - $6000
profit - $3000
manager's fee payment - $600 (profit $3000 * manager's fee 0.2)
net investor’s profit - $2400

Investor Sidorov:
funds at beginning of period - $5000
funds at end of period - $10 000
profit - $5000
manager's fee payment - $1000 (profit $5000 * manager's fee 0.2)
net investor’s profit - $4000

Manager Ivanov:
funds at beginning of period - $2000
funds at end of period - $4000
Income - $2000
Management fee: from the Investor Petrov - $600, from the Investor Sidorov - $1000.