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.
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%
$ 5000 Investor Petrov
$ 3000 Manager Ivanov
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)
$ 10 000 Investor Petrov
$ 6000 Manager Ivanov
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%:
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
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
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.