How to invest in managed forex
I used to trade the stock market, so I know how to use the broker platforms for studying charts, watching prices, and placing trades into the market.
I found it very interesting, reading the annual reports and the announcements from the different companies, listening to the news and keeping up with current affairs, hoping to see what was going to happen next.
I found it exhilarating watching my stocks move up… and excruciating watching them move down. My whole life was beginning to be consumed by watching these little numbers moving up and down on the charts. Constantly checking the buy and sell orders in the market, to see if any big money was moving in… or out of my stock. My life wasn’t my own anymore.
Time to let go and make a big change!
How about foreign exchange I wondered. So I had to find out a little bit more about the foreign currency markets and how to get involved in forex. I suddenly realised that with my personality it would not be long before I was hooked.
Not knowing much about forex, I had a brainwave. Have you ever had an ‘Aha’ moment? It occurred to me to do some research into how to invest in ‘managed’ forex! Rather than learn about a whole new financial market and trade forex myself, I would look into having a company manage my forex account and do my trading for me.
Firstly I knew I had to find the right one. If I was going to invest my money into it, I needed to find a reputable company with offices here in the United Kingdom. I wanted to see their trading history and read reviews from their other customers. So I needed to create a shortlist of the companies I wanted to ‘interview’.
I soon realised I had better get a grip of all the terminology. I thought I was getting somewhere when I found PAMM. Of course I had to look this up because the elusive ‘they’ think we all already know what all these letters stand for!
Percent Allocation Management Module, or Percent Allocation Money Management. MAM stands for Multi Account Manager. These are software tools enabling the trader to place multiple ones at once. It allocates the correct amounts to each customer’s account.
It seems to me that the PAMM is a single trading fund for multiple customers, and the MAM is multiple accounts perhaps trading different strategies and even with different brokers. Sharing it like this allows the traders more money to deal with, whilst also sharing the risk amongst all the account holders.
Forex brokers use these terms to describe allocating money to a specific trading funds, which is transacted for you, rather than trading it yourself. PAMM or MAM… Either way I need to sign a limited power of attorney, LPOA, to allow these companies or traders to do mine.
Something else came up which was helpful. ‘Who can manage my forex account?’ I will definitely choose a company who is regulated by the Financial Conduct Authority, FCA. That way I know my money is being traded within specific guidelines and regulations set out here in the UK.
So, I have committed to making change. I have looked into how to invest into it, and I have chosen! What’s next? I need to open an account and link it to theirs. I need to assign trading rights to them by signing the LPOA and some other documents, and I need to deposit some funds.
Then, trading begins! Once the positions are closed I can access my money. A percentage of my profits will be shared with the trader to cover their fees, and the balance stays in my account. A huge plus for me is that I will have a trading log-in. That way I can watch the transactions as they happen on mine… after all, I never said I was giving up completely!