A percent allocation management module, or PAMM, which may also be referred to as percent allocation money management, describes a software application used predominantly by foreign exchange market (forex) brokers to allow their clients to attach money to a specific trader managing one or more accounts appointed on the basis of a limited power of attorney. PAMM solution allows the trader on one trading platform to manage simultaneously unlimited quantity of managed accounts. Depending on the size of the deposit each managed account has its own ratio in PAMM. Trader's activity results (trades, profit and loss) are allocated between managed accounts according to the ratio.
Because currency trading and other forms of arbitrage achieve profitability within very narrow margins, typically, a PAMM system allows more money to be brought into play while distributing the risk of one trader across (usually) multiple investors.
The percent allocation management module is a form of piggybacking a large investor’s money onto the smaller account of a trader. The trader's own money remains at risk, which theoretically reduces the chance of irresponsible
Depending on which currency with which the customer has funded their own account, the ratio calculation of each customer's share is typically converted to United States dollar amounts. This facilitates an ideal investor-trader relationship.
Money allocation for traders and investors
In this picture example, there are four investors each with a different amount of risk capital that choose the same money manager. The money manager trades the entire capital, $100,000 total, on one master account (the
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