Questions on PAMM accounts

Very clear conversation. So, investors always manage to withdraw whenever they like even with open position.

Thanks,
SIM

Sorry, Wallace, I am still not convinced mate.

I have said my experience is limited so take what I say with a pinch of salt. I would dig much deeper. Think about this logically......you have a trade going and an investor wants to pull funds out. There is no way that will work unless the open trade is dealt with. That means a partial close, so ask Support if they do partial closes. The next hurdle is that how does the PAMM system know which account to assign the close to? This implies that they have some sort of reconciliation system in the background that will know who is going to withdraw funds. This may well be possible but you would do well to ask some tough questions.......

Then lets look at the trade mechanics. Your investor wants to withdraw funds....how is he going to instruct the partial close? You are the trader, not him. Are they going to start taking trades by email from your investors?

My point is, the mathematics using equity, etc is pretty simple. The remaining trade is not so simple. Support was just far too quick to answer your questions in this regard.

Hi All,

Below is my conversation with live support from Instforex:


Waiting for response...
For you to connect operator Dmitriy
02:04:28 You:: hi
02:04:31 Dmitriy: Hello. How can I help you?

02:04:44 You:: May i ask something related to PAMM?
02:05:25 Dmitriy: Yes, of course. What question do you have?

02:05:56 You:: Lets say i am the trader in a PAMM account. And i have few investors.
02:06:41 You:: my question is, when i have some open positions running, is it possible for any of those investors withdraw their money?
02:06:59 Dmitriy: Yes, it's possible.

02:08:11 You:: what happen if the account having huge drawdown? and the amount he want to withdraw is more than what the account have?
02:08:37 You:: if this is the case, is he still manage to withdraw?
02:09:09 Dmitriy: He can't withdraw more than account have.

02:13:15 You:: lets say i have 3 investors. A, B, C. A invest 500, B invest 500 C invest 250. Now the free margin is 250
02:14:05 You:: According to percentage, free margin for A=100, B=100, C=50
02:14:31 You:: But the total free margin in this account is 250
02:14:52 You:: My question: Is it possible for A to withdraw 200?
02:15:03 You:: Or any amount that more than 100?
02:16:08 Dmitriy: Investor can withdraw his whole investment with profit or loss.

02:16:50 You:: Do you mean that A only manage to withdraw 100?
02:18:40 You:: I really want to double confirmed.
02:21:31 Dmitriy: No, he can make a withdrawal in amount of his total investment + profit or - loss, that he has proportionaly his share in PAMM trader's account

02:24:11 You:: A total investment is 500, then the account loss 80% (1000/1250). So free margin for investor A is 100(500 - (500*0.2))
02:29:14 Dmitriy: If trader has a loss of 80% investment decreases in 80%, so investor can withdraw only 20% of his initial investment, in that case, 100.

02:29:35 You:: ok, thank very much
02:29:42 You:: i think i am clear enough
02:29:43 Dmitriy: You're welcome.



So everyone, an PAMM investor can withdraw his/her money anytime even when the PAMM trader account has huge drawdown. But his/her withdraw must calculate accordingly to this formula - withdrawal in amount of his total investment + profit or - loss.

Meaning this investor can never withdraw other people money in same PAMM trader account. However after his/her withdrawal, the total free margin will become lower. So this will blow the account more faster.

Hope this is clear to everyone.

Thanks,
SIM

As clear as mud......I must be slow.

What happens to the trade? Do the other investors simply pick up an extra dose of exposure, or do they close off part of the trade?

Lets say its just you and me. We both have a 50% share of a $10k account. There is one big trade using $2000 margin(2 Lots @ 1:100) and this trade is in $4000 drawdown. This means that you have $2000 that you can draw. You take your $2000, leaving us with $2000 free equity. The fact is, that is MY free equity and you have zero free equity. Now you will not get a margin call because you are piggy backing on my equity. How is that fair to the other investors? To be fair, you would have to close 20% of the trade, so you should only have 1.6 lots being used.....and the loss has to be realised in your account.

I simply cannot see how it can work otherwise?

Kenny, if the other investor withdraws his 2000$, you 'own' the trade. If you close the deal fully, you get the margin back and end up with 4000$ in equity... Guess that means you're off way better than him :)

Soeren

P.S.

If you let the trade run and win, you get all the profits too...

I am lost here. I agree mostly with kennyhubbard's logic. If other group members withdraw their money until they have no more free margin, another 1 pip move against the position should force them to close their position (partial close of total size), where I am the only one hanging onto the losing trade with unrealised losses (half the original size), but not yet getting margin-called. When the size is reduced by half, the free margin that I have remaining will have sufficient buffer as though I went in alone right from the start.

Can anyone enlighten all of us here?

Different broker has different flexibility pro and con.

If you referring kennyhubbard's case, if you using instaforex, you can set the leverage 1:1000, then you can utilises all your margin till burn. And for Instaforex, is not a safe guarantee for investor, as the manager himself did not required any margin deposit, his own manager account can just have $100, and other fun is from investor.

While if you bring this case over Alpari, manager require to have 3k deposit into his manager account to trade together with investor. As a crazy investor, you also invest 5k as you see his manager account has become 5k in a month. Bad luck happened, the total account have DD 40%. And for withdraw, I'm not sure alpari will allow. If allow so; the leverage is only 1:100, I'm not sure how many margin you have left to withdraw.

So I think the game is already set fair to protect each side of investor and manager. Pro and con of each broker.
Instaforex Rules are very lose for manager, so they protect investor more.

Can anyone recommend a broker for money managers?

Requirements:
#1 reliable and regulated, funds are safe
#2 STP-ECN
#3 Can use MT4 to trade, can place limit orders at the bid/ask, supporting fully automated EA, even for sub-linked accounts and total funds under management
#4 broker back end distributes the performance fees according to the manager-client agreement.

So far in searching through the internet, I've found some good brokers that have 3 out of the 4 requirements, but couldn't find any that matches all the requirements. I don't want to handle the clients' money. I just need a limited power of attorney to manage the trades, and be paid accordingly.

Cheers.

K, see this bit here:

https://fxtrade.oanda.com/forex_trading/fxmanager/

And the user guide.

It explains how to do the re-proportioning works when a client withdraws or wants a different risk profile. And also the principles in play.

Hi Elkart,

Thanks for the info. Howeve, it seems that Oanda does not provide MT4 platform. Am i correct?

Cheers,

Wallace

No, they're not MT4 based.

But all the PAMM systems work the same basically. So if you understand one you understand them all. That segment contains a very comprehensive explanation.

I'm not very experienced in money managing, but I have been playing around with it this week.

I could add clients while positions were open, we withdrew a small profit with open positions. And it all boiled down to the re-proportioning.

Good thing to remember is that that created extra trades and that in turn adds cost. Took less than a week to get it under control.

Best is to get hold of the software, try a few demo clients.

IBFX, Alapri, Go few other all offer mt4 and the PAMM stuff.

GO doesn't do PAMM, at least that is what they told me last week. (If I am wrong, please correct, me, but that is what the email stated)

IBFX, you have to be NFA certified.

:)

Gil

Go I presumed. For IBFX not sure hey. I spoke to them before and it seemed ok, but I am not American.

ODL maybe? Varengold? MB trading?


Lot of companies now days won't touch Americans. Guess that complicates things.

Thanks for the suggestions,

dukascopy has PAMM, but in java.
alpari UK has MAM, but the multi MT4 platform does not support EA (fully automated system)
openFX not from preferred regulated environment (don't feel safe enough)
IBFX market maker (not ECN-STP)

and the list goes on.... I couldn't find any broker that fits the requirements, at least not yet.
Hope someone can find some broker in the world that has all the requirements, and I'm sure a lot of business will go to them.

Cheers

IBFX is moving towards ECN if they're not already.

I had to adjust my EA's recently for that. They're opening in Singapore and UK. Soon as that's done they'll be your crowd.

Elkart posted:
    IBFX is moving towards ECN if they're not already.

If IBFX is ECN already, I wouldn't need to place my order 3 pips away from the bid/ask. Maybe some time in the future....
still waiting and looking around.

How far away can you place it on a ecn?

Can't put down trades with them if you have a TP or SL which is ECN behavior.