PAMM Investment Ultimate Guide – 7 Secrets To Find The Best Account
Estimated Reading Time: 36 minutes
- 1. PAMM Investment Ultimate Guide – Introduction
- 2. PAMM (Percent Allocation Management Module)
- 3. Seven Secrets To Find Forex Best PAMM Account
- 3.1. 1) Know Your Risk Tolerance & Have Your Strategy & Stick To It
- 3.2. 2) Don’t Chase Returns But Be Disciplined
- 3.3. 3) Broker – Basic Security
- 3.4. 4) Management Company – Don’t Overlook
- 3.5. 5) Professional Background & Fee Structure
- 3.6. 6) Trading Strategies & KPI (Key Performance Indicators)
- 3.7. 7) Risk Management Settings
- 4. Best PAMM Account
- 5. Wrap Up
- 6. Appendix – Alternative Passive & Own Trading
PAMM Investment Ultimate Guide – Introduction
Why Do We Use PAMM Account To Earn Extra Money?
Our site intends to provide you with the smart ways to make Extra Income. Firstly, in case you haven’t read Three Clever Ways To Diversify Your Income For A Rainy Day , suggest you do so because it explains the whole background & rationale behind why you need Extra Income from Passive Financial Trading. In this report, we said; “Make the greatest use of expertise to save your time and boost your chances of achievement instead of doing everything on your own“. Yes, I know everybody is busy and has limited time, thus making the best use of Expert’s Expertise is the most logical & smartest way to earn money on the side while minimizing the risk & saving time.
As explained in Three Practical & Safe Ways To Succeed In Passive Forex Trading, there are three types of Forex Passive Trading, namely Copy Trading (Social Trading), PAMM & EA. What I focus in this report is PAMM Investment. However, the 7 secrets here are essential information that will apply to the other two types of Forex Passive Trading.
As being explained later, PAMM (Percent Allocation Management Module) account is a Managed Account where you allow the experts to trade for you. The key point here is that the Experts (skilled traders & institutional traders) have significant advantage over the average retail traders. For detail statistics behind this fact, see Passive Trading. Given the zero-sum game in Forex Trading, using such experts as the winners will massively increase your chance of making profits even if you don’t know anything about the trading & markets.
PAMM (Percent Allocation Management Module)
In case you’re not familiar with PAMM account, suggest take a look at PAMM – Percentage Allocation Management Module, where you will find What’s PAMM Investment all about & How PAMM Account works in details.
Just a brief wrap up, Managed Forex Account is the form of alternative investment a money manager trades the foreign exchange market (Forex, FX, or currency market) on a client’s behalf for a fee.
PAMM – Percentage Allocation Management Module is a new technological solution allowing the trader on 1 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. In essence, PAAM allows small investors to enjoy the security & return of managed account that usually demands at least $10,000 deposit. Theoretically the system can accept from a cent, and in fact some PAMM trader permits the investment from $1. Under PAMM Investment, you don’t need to learn how to trade forex or any forex trading strategies, but only need to selectthe best Account. In Three Clever Ways To Diversify Your Income For A Rainy Day, I said Forex Managed Account is a Scam Free / Ponzi Scheme (one of the most popular swindles on internet) Free, but never ever forget the fact that legitimate trader can still wipe out your account due to his/her incompetence.
Seven Secrets To Find Forex Best PAMM Account
With that said, this report will explain 7 Secrets to Select Top PAMM Account by breaking down into 3 broader categories as below;
- Yourself – Secret 1) & 2); Basic Disciplines
- Broker / Managing Company – Secret 3) & 4); Institution Assessment
- Trader – Secret 5), 6) and 7); Expert Verification
Allow me to repeat, basically all 7 factors can apply to the Selection of Best Traders in Copy Trading and to some extent the Selection of Best Forex EA (Robot) as well.
So, let’s start up with Basic Disciplines (Yourself), which makes up 1) & 2) secrets as follows;
- 1) Know Your Risk Tolerance & Have Your Strategy & Stick To It
- 2) Don’t Chase Returns But Be Disciplined
1) Know Your Risk Tolerance & Have Your Strategy & Stick To It
PAMM Investment should be seen as a long term portfolio component designed to help balance overall risk while adding diversification, rather than as a quick fix to an ailing portfolio. It’s natural even the most successful trader experience periods of flat return or drawdown. The wise investor will remain steadfast to the investment plan and not close the account out of panic and fear prematurely in order to allow the account to recover from those temporary losses. Stick to your original strategy and keep in mind no need to swing at the first pitch every time. As any Billionaire will tell you, long term wealth requires patience, not erratic decisions based upon greed. Having said so, it’s critical that you know your risk tolerance level as a basis of your strategy and select PAMM account fit into it, means
you need to fully understand traders’ plans before you invest by recognizing your capacity. Let me stress that Risk Tolerance varies by individual depending on various factors, and given its paramount importance, suggest you measure your tolerance by taking this Assessment Test, it takes you a few minutes to get the result, and you should be “Above Average Tolerance Level" when you participate in the Forex trading in general (for PAMM Investment, Average / Moderate Tolerance Level could be ok since you are not trading on your own), be noted this is just a guideline.
2) Don’t Chase Returns But Be Disciplined
I know the human nature that is intrigued by the highest yields. However, if you want to be a smart investor, and NOT a gambler, you will choose the trader that matches your risk profile you measured in the above 1). High yields are great, but long term stability is far more important. This is especially true in a volatile market like forex. Do not choose programs just because trader is currently hot. You as a wise investor should select a trader based on the skills and trading style that have been employed in the past to achieve consistent returns which, most importantly, should match your risk tolerance. Protect yourself from poor decisions and move more swiftly towards your investment goals. Let Me Reiterate;
Forex is very popular investment market in the entire world. However some research indicates most investors don’t even know what type of license traders must have to legally pool money and trade, and very little knowledge to evaluate programs, needless to say in offshore but even in domestic. These under-educated investors eager to reap the “high profits” of high-risk trading which are offered by private traders (unlicensed) and management companies who could possibly not disclose corresponding high risk in honest manner. As a result, huge numbers of investors see success very short-lived in almost all cases.
If the trader can’t show you proof of past performance but offer very high return, you really have little chance to succeed in mid-long term basis.
Three Yield Characteristics
The below gives you general profile by return range of PAMM account aim to achieve:
Aim primarily for one goal, positive returns every month. The main focus is preservation of capital and purchasing power (means over inflation), and long term growth through account compounding. They may have very cautious “stop losses” setting to prevent large draw downs. This is the common type of trader, and will typically produce returns between 20 – 40% per year.
Try to capitalize on big swings to make profits, and may trade various positions without cover (naked). These accounts may aim for high profits though, they have a relatively bold predefined stop loss %, and a profit goal for every month. With a moderate risk strategy, the returns for investments may range between 40 -100% per year.
Those who would be considered “high risk” trader only have one goal in mind, high profit achievement. Some of these accounts may use such high leverage that they can turn 50k into 1M within 1 year, but during that time they are always “naked" and exposed to risk. Despite their amazing success, there is usually a huge reality check at some point that refines their strategy. With “high risk” PAMM account investments, the returns can be seen 100 – 500% per year, but could be greater like 1,000% (but usually can’t last over 2 years).
So, don’t be dazzled by amazing return %, High Return always accompanies High Risk and often Short Life.
So, let’s move to Institution Assessment (Broker / Managing Company) which makes up following 3) & 4) secrets;
- 3) Broker – Basic Security
- 4) Management Company – Don’t Overlook
Everybody should practice proper risk management and the followings are the key areas you should pay attention, which may allow you to avoid the common pitfalls while choosing the right trader. See the below image to visualize the overall structure of Managed Account (PAMM Account) & Participating Parties;
It explains that;
In the context of hedge funds, managed accounts are based on trading advisory agreements. An investor opens an account at a prime broker (usually chosen by the hedge fund manager), which is then managed in trust by a hedge fund manager.
Alternative Investments Management blog
Simply, the concerned parties are you (investor), broker and management company where trader works for. This is a standard / original structure of Managed Account.
When it comes to PAMM Investment, it’s often the case that Forex broker hires professional trader and offer in-house PAMM account to investors who want to start from small capital. Means, under this set-up broker makes the role of managing company as well.
3) Broker – Basic Security
Firstly, your money is stored in your Broker and you want to use the entity you can fully trust. And, the trust should be verified by:
- Being Regulated / Licensed and in good standing with their regulatory authority (NFA, CFTC in the US & FCA in the UK etc.), being regulated doesn’t guarantee that a broker is good, but at least gives you some recourse if things go wrong.
- Being Insured by government protection scheme like FDIC in the US & FSCS in the UK etc.
- You may want to chose firms not only being regulated but also being well capitalized.
- Finally, you may want to check if any complaints have been filed against the broker, and if so, how the broker handled resolution of the issue, in North America, check BBB (Better Business Bureau).
Some other tips for your additional security are:
- Check if your funds in the account are held on a Segregated basis, which may protect your funds in the event the appointed brokers become insolvent.
- When you fund to your segregated account, you sends the wire with “further credit” to yourself, which ensures the funds are transferred from one account of the investor to another account they control, never putting the funds at risk for fraud.
- Make sure the contract guarantee a specific max draw-down in % for your account, which will help protect you from losses or legally recoup losses if the trader breaks the contract.
For further details related to the broker selection, suggest you take a look at Select Trusted Forex Brokers With No Hidden Agenda;
4) Management Company – Don’t Overlook
As previously said, when it comes to PAMM Investment, there are many cases that Forex Broker offers in-house PAMM account by hiring trader on its own without any separate organization setting for Managed Account. In this case, you don’t need to do anything as long as you go through the above 3). However, if there is an independent firm that manages the account, you have to assess it. Theoretically your money is in the broker & under your control, you may not worry so much but con artist uses unpredictable trick so it’s better to do minimum Due Diligence in any case. I’ll list up key Due Diligence criteria for you to evaluate the company as below (it’s not an exhaustive list but obviously you don’t need to check everything, in fact as long as the company is registered in the local regulator you may omit most of the points);
Due Diligence Check List
- Key Managements
- Ethical Philosophy
- Employee #
- Years in Business
- Service & Brands
Legal Structure & Compliance
- Registration Status
- Independent Audit Report
- Obtained License
- Past Litigation and or Regulatory Proceedings
Asset & Program Profiles
- Investment Market
- Equity Size under Management
- Maximum Size of Program
- Portfolio Structure & Valuation
- Sector Information
- Entry Requirements (minimum investment / accepting jurisdiction)
- Fee Structure
- Lock-up and Withdrawal Restrictions or Periods
- Key Financial Statements (B/S, P/L, C/F)
- Annual Report (audited by certified accountant)
- Monthly Return
- CAGR (Compound Annual Growth Rate)
- Worst Draw-down
- Consecutive Profitable & Loosing Periods
- Standard Deviation
- Sharp-ratio (these parameters are used to evaluate Trader in charge)
- Security Measurement (members’ personal info)
- IT & Disaster Recovery
- Contingency & Business Continuity Plans
- Data protection & members’ privacy protection
- Where they are going
Just in case, you want to go further, try to get:
- ) Company formation documents (e.g., Articles of Organization or Articles of Association) and tax related documents like EIN letter from the IRS in the US, Company’s mailing address & physical address.
- ) If there are multiple addresses for the fund or if the fund shares an address or office space with another fund or another business or company, require an explanation and obtain document (written contract) that enables sharing or co-location.
- ) State Certificate of Good Standing from fund. This can be acquired from the formation state. Contact State to verify certificate status or request that certificate be sent directly to you If the company is registered as an authority advisor such as SEC in the United States, review Form ADV — search for number of employees, number of customers and funds under management. See also if any consultant customers are SEC registered investment companies or non-registered funds, and if the consultant has had issues with regulators, has other company operations, etc.
- ) Fee structure details such as Confirm manager’s right to profits require that it first exceed a stated return to the investors (termed a hurdle rate). Check is it a fund of funds? Confirm “high water mark" (where an investor had earnings and the manager took a share of profits, managers can only make profits in a subsequent year if the losses are first made up). There are special considerations when the fund is a fund of funds, the most important of which concerns fees and compensation for the two managerial levels. Costs should be held only slightly higher than investing in a stand-alone fund and checking investors ' latest reports, etc.
Ok, let’s move on to Expert Verification which makes up 5) – 7) secrets out of Seven secrets;
- 5) Professional Background & Fee Structure
- 6) Trading Strategies & KPI (Key Performance Indicator)
- 7) Risk Management Setting
5) Professional Background & Fee Structure
The first critical thing you need to do is to define the “accountability” of the trader including the point if the trader is licensed or Unlicensed (private) to clearly understand what your risks truly are. The followings are some characteristics generally found in each trader:
- If a trader is licensed, they are accountable for mistakes and will usually do their best to grow your account, in other words, they always try to mitigate their risk and achieve steady profits, not aim for record-setting returns.
- On the other hand, private managed traders tend to be risk takers thus may have higher yields at times, and have their own interests in mind when trading the money of others. In short, investing with private money manager is risky, and most success is usually short-lived.
There are many jurisdictions where the Forex trading is not regulated, accordingly trader is allowed to invest OPM (Other People Money) without license or certification . Therefore No Licence is Not directly led to the above conclusions, but clearly you’d better make more careful check on all the following points.
A. Background / Past Track Record
– Use free on-line public record search such as CheckPeople to see if there is any hidden information.
– Months with 25% or more in losses (draw-downs)
– Negative yields any more than 3-4 months per year
These could be a sign that their strategy may not be as sound as they claim and future problems with your account. Make sure the track record is something verified by the 3rd party. If you are speaking with a private Forex trader, all yields you see could be hypothetical.
If a trader does not have a track record or licensing history of over 2 years, it is risky to invest with them. Usually, over the course of 2 years, there will be a huge event in the market which will test the experience of a trader. Unfortunately, it is very rare that any trader will stay successful without major collapse and licensed for this 2 year period. Those who do last are the best of the best, and are usually the ideal traders to invest with.
B. Fee / Commission Structure
Generally speaking, avoid money managers that charge significant transactions-based fees. You will have an inherent conflict of interest with any money manager that sees his income grow in a significant way from anything other than the size of the accounts he manages & frequency he trades. Even those systems based on annual profits raise fundamental conflicts of interest. It entices the money manager to pursue overly risky investments: He or she won’t have to pay you during the years your account suffers losses, but the years that see record profits, the manager gets a percentage of that.
6) Trading Strategies & KPI (Key Performance Indicators)
Numerical Criteria of Operational Control should be Checked. You may want to check the following points (firstly you should confirm if they set these basic KPIs) to evaluate if the account fits your own target profile. Bear it in mind that the green numbers are just my own subjective norm as a modest risk taker and can’t apply universally:
A. Return Target – Conservative / Modest / Aggressive
Review again the general profile by return range explained before and see which return target fits your strategy & risk tolerance. You may achieve yields 200+% per year with the aggressive risk trader, but in all reality, you should be looking for the one that will perform consistently over the long haul. As repeatedly said, chasing high yields can lead to short term success, but in the long term, steady traders will always come out on top. Most managed accounts will barely exceed 50% per year, however there are aggressive ones making 5 – 20% per month. You really have to be aware of your risk tolerance level, because making higher figures means your trader loves to risk your money (this is not necessarily bad thing if you are aware and accept it). Remember, if you can find a trader with yields exceeding 150%, they will usually also have a few relatively big losses on their track record, which modest risk taker may not be tolerable.
B. Amount of Capital Under Management
The total capital amount affect the trader’s yield capability. Certain traders may make amazing yields with less than 10M under management, but as their fund grows, their strategy starts to show its holes. As many traders learn the hard way, trading with more funds increases your chances of “slippage”, which in return affects the prices you enter and exit at. When you are implementing 500 positions at once, it is a lot easier to earn high yields than with 5,000 positions. In other words the account with large amount of money (50M+) tends to lower the yield (this is just general observation). In any case, it is good to ask the trader to explain their plans for new growth, and how their strategy will adapt to it.
C. Win to Loose Ratio (%)
This is probability of success. For example, a win to loss ratio of 20:10 would indicate that a trader makes 20 profitable trades for every 10 losing trades. This ratio could also be given as 2:1, or as 200% (calculated as ((20 / 10) * 100) = 200), meaning that there are twice as many profitable trades as losing trades. The win/loss ratio is used to determine if a trading system is likely to be consistently profitable. It is not very useful on its own because it does not take into account the monetary value won or lost in each trade thus often used together with the risk/reward ratio explained below. The above example of 200%, sounds good, but if the losing trades have dollar losses three-times as large as the dollar gains of the winning trades, the trader has a losing strategy. Professional traders know that at best they will win on 60-70% of their trades, they understand they will lose on any where between 30-40% of their trades, in other words if target is over 250% looks too optimistic.
D. Risk / Reward Ratio
It is a parameter that helps a trader to determine how much a trader is risking versus the potential reward (or profit) on a trade. While this may seem simplistic, many traders neglect taking this step and often find that their losses are very large. If the risk is $200 and the reward
is $400, then the risk-reward ratio is 200:400 or 1:2, which is a minimum risk-reward ratio though it depends on other parameters such as the above Win to Loose ratio (see below F. Expectancy Formula for more details), anyhow the larger, the better and 1:3 is said to be appropriate. It is based on the theory that if only 33% of your trades are successful (combining the above Win to Loose Ratio here), then you will still make a profit. Example of 3 trades;
- 1st Trade – Risk (loose1) $100 : Potential Reward (win3) $300 – trade loses – ($100)
- 2nd Trade – Risk (loose1) $100 : Potential Reward (win3) $300 – trade wins – $300
- 3rd Trade – Risk (loose1) $100 : Potential Reward (win3) $300 – trade loses – ($100)
– Combining all 3 trades, even 33% win ratio, $100 profit!
E. Sharp Ratio
Measure of the excess return per unit of risk in an investment asset. It characterizes how well the return of an asset compensates the investor for the risk taken. Given the definition, it’s clear that the higher sharp ratio gives more return for the same risk, to give you some insight, a ratio of 1 or better is considered good, 2 and better is very good, and 3 and better is considered excellent. The US long-term average stock market (S&P500) sharp ratio is around 0.5. In fact, this is important indicator when you construct your portfolio. The more you include better sharp ratio assets, the safer your total portfolio would be – safer means you can expect higher return with lower risk.
F. Expectancy Formula
You may use a few of the above parameters to calculate Expectancy, use Free Calculator; The expectancy basically shows the average value of a single trade, or expected profit. Usually the higher, the better your trading system is – but here some distinctions have to be made. A adverse expectation implies there is no profit for the trading scheme.
7) Risk Management Settings
A. Stop – loss Placement
Stop / Loss placement is an order placed with a broker to sell when it reaches a certain price. Stop loss is a must from better risk management perspective, because this functionality provides Investors with control of risk of loss. Setting a stop-loss order for 10% below the price you paid will limit your loss to 10%. This strategy allows traders to determine their loss limit in advance, preventing
emotional decision-making. Investors are given the possibility to block trader’s activity beyond a certain drawdown level. This is critical to address, since some traders can involve ego in bad trades and “let it ride” well past the “draw-down limit” that is intolerable, hidden risks are identified. There is no particular guide for specific % but depending on individual environment & strategy though, 5-25% seems to be popular & safe range per trade but it should be controlled as the below Risk% that is a notion of overall money management rather than risk control for each trade.
B. Draw-down Limit Placement
If you are working with a licensed trader, large draw-downs can usually be avoided, but with offshore private traders usually not the case. Check if they have guarantee a max drawdown limit, which should be controlled by the below stop/loss practice. Unless you’re very aggressive investor, you may want to see less than 30% draw-down maximum.
C. Leverage Level
Traders usually use leverage to significantly increase return by using margin accounts, simply put leverage is a loan without interest that is provided to an investor by the broker, the highest ratio they can do in Forex margin account goes up to 400:1 in off-shore FX brokers, means if you have $10,000 cash in your account, the broker allows you to trade up to $4,000,000 – this is margin-based also real maximum leverage (understand the difference between margin-based and real leverage, since most traders do not use their entire accounts as margin for each of their trades, their real leverage tends to differ from their margin-based leverage, means in the above example if the trader use only $200 as 2% of total capital for particular trade with 400:1 margin based leverage, the traded amount is $80,000 and the real leverage is 8:1 because $80,000 vs $10,000 as total capital in your account). You can imagine that it is a double-edged sword or a big sledgehammer, in other words leverage has the potential to enlarge your profits or losses by the same magnitude – with leverage, you stand to gain profits that are calculated with leverage and this enables you to make substantial profits from successful trades. However, when you lose a trade that losses are also calculated according to the leverage that was extended to the trader. So, you can make huge losses in the same way that large profits were possible. The greater the amount of leverage on capital you apply, the higher the risk that you will assume. Swing it slowly and carefully is basic risk management theory. A highly leveraged trade can quickly deplete your trading account if it goes against you thus this is one of the key numbers you want to check with your trader, there is no particular guideline of proper leverage but the trader always use over 200:1 in margin-based leverage (say real leverage could be 4:1) for every single trade looks a bit excessive and risky.
D. Risk %
This is a loosing % against your entire equity by any 1 trade. Popular method is 1% risk rule which states that no more than one percent of a trading account may be risked on any single trade. In other words, if a trader has a $100,000 account, the maximum amount that they can
risk is $1,000 per trade. The reason behind is to control the maximum negative impact on your whole capital in the account caused by each trade, namely try to make sure that no single trade has the ability to blow up a trading account. Traders that abide by the one percent risk rule, are much more likely to survive an unexpected losing streak, than a trader that risks half of their account on each trade. Understand the difference between stop/loss per trade and risk %, in the above example, when you place only $2,000 out of your total capital of $100,000, 1% risk control means 50% stop-loss on this particular trade because, $2,000 x 50% = $1,000 loss / $10,000 = 1% Risk out of your total capital. Risk % is that you are emotionally ok with losing on any one trade. Most traders cannot operate emotion free after losing more than 3% of their account value on any single trade. As such, risking 2% or less is a sort of guiding % for any trader.
Let me show you just a simple winning formula using the 3 key parameters. Win to Loose Ratio & Risk / Reward from 6) Trading Strategies & KPI (Key Performance Indicators) and Stop / Loss Placement from 7) Risk Management Settings. I use pip term to give you more realistic picture, let’s set the below assumptions which are not unachievable KPI for experienced trader;
X) Win to Loose Ratio — 60%
Y) Risk / Reward Ratio — 1: 1.5 (, which can be 20 pips : 30 pips)
Z) Stop Loss Placement — 20 pips
So, profit target is 30 pips and stop loss is always 20 pips or less.
When trader performs 10 trades and wins 6, then:
6 x 30 pips = 180 pips profit
4 x 20 pips = 80 pips loss
Net profit is 100 pips and average 10 pips per trade.
Bottomline, if you can identify the trader who makes such disciplinary trade of X), Y), & Z), you will be profitable, in other words these are key parameters you need to validate. Probably, these traders will not make you instant rich but will give you steady solid passive income which may be enough as your safety-net.
Best PAMM Account
PAMM Account Provider
There are several PAMM account providers (mainly FX Brokers), some of them are;
Although Alpari collected the highest votes, Alpari (UK) Limited actually went into insolvency caused by the SNB (Swiss National Bank) & subsequent SAR (Special Administration Regime), the company’s US NFA membership was revoked, preventing them from offering their services in the United States. Alpari Research & Analysis Limited, which shows a London address though it provides only research and analysis and is not licensed to trade. However, accept any UK Trader (in fact I myself could register and trade freely), and they keep sending me the newsletter like below;
Whatever loophole they use, it’s the fact that they are not licensed to trade in the UK and surely they are not regulated by FCA. In other words, the clients’ money may not be segregated meaning your money may not be held entirely separately to the company’s own funds. So if any bad thing happens, you have large risk of not recovering your money. Therefore, we strongly suggest you keep away from Alpari.
The Highest Score Forex PAMM Account Broker
Among the list, the PAMM account that achieved the highest score is FXOpen, being regulated by Financial Conduct Authority (FCA) in UK. Means your money is segregated & basically safe. See further details of their PAMM account and they list PAMM Account Rating like below;
You may want to take advantage of FXOpen NDB (No Deposit Bonus), if you’re interested.
I know some of you are still inclined to prefer HIGH YIELD despite the awareness of underlying risk with the belief of “if I don’t risk much, I can’t make much”. Surely it’s true, but in case you have nothing left in your account you can’t make anything. Say without even 0 leverage, under 1:1 of Risk/Reward ratio & Win/Loose ratio (means 100%), If you Risk 50% – you will wipe out nearly whole money as soon as you have 3 consecutive losing trades as below:
- Suppose trader has $100,000 in the account.
- Risk $50,000 for the chance to make $50,000 (a 1:1 ratio)
- If the trader wins, the account to be $150,000, fantastic.
- However, if looses, only $50,000 is left and the trader needs to double $50,000 to get back to the starting point.
- If the trader continues the same strategy and risk half the account
- Then, fails again, only $25,000 is left. Now the trader has to quadruple the account to get back to where you started.
- Fail one more same trade results only $12,500 balance.
- You see just 3 consecutive losses wipes out 87.5% of your account
, which is practically broke, isn’t it?
Aggressive trader without proper risk control discipline may do this ridiculous mistake in panic to recover the 1st loss – if the trader employs Martingale tactics (This is a common practice in gambling places like Las Vegas), you will see complete loss of your capital instantly. This is a bit extreme case, but in reality HIGH YIELD PROGRAMME TRADER does more or less the same way behind the scene, that’s why you’d better know specific risk control rule of the trader to detect intolerable hidden risks. Without clear identification of them, you are doing gamble rather than investment, I can’t stress more that knowing trader’s Risk Control is very important and judging if the control level fits your risk tolerance level is paramount important. Allow me to quote Sun Tzu’s Art of War word again, “if you know the enemy (trader should not be your enemy though) and know yourself, you need not fear the result of a hundred battles." – for more details pls read my separate article , yes it speaks everything I want to convey here.
BTW, needless to say, any observation of significant gap / inconsistency between what they claim and the actual numbers suggest you take very cautious approach toward such program.
Finally, let me remind you that a good dose of your own common sense is always helpful before making your final decision – Never ever forget, in investment world, anything you feel “Too Good To Be True" is unfortunately Not True.
Appendix – Alternative Passive & Own Trading
Other 2 Passive Trading
PAMM – Percentage Allocation Management Module is the 2nd of 3 Passive Trading, the others are;
Lastly, you may be skeptical about trading Forex PASSIVELY, then suggest you first read the below report;
【 3 Practical & Safe Ways To Succeed In Passive Forex Trading 】 , which gives you good insight on how it works.
Forex Own Trading
For those who still would like to pursue self-trading, strongly suggest you go through:
These reports comprehensively explains how you can evolve Forex Trading successfully by using world top class tools & the full list of them. It includes the introduction of Trading For A Living: Lucrative Trading Business, Travel the World, And Work For Less Than 20h/week.
Good Luck & Happy Passive (or Own) Trading!!
GEM (Global Extra Money) Publisher