A Review Of FX Money Manager Trading Technology Tools

Posted on Dec 15 2014 - 7:43am by Editorial Staff

Money

The explosion in growth for managed forex accounts has led to multiple technological offerings and developments for potential clients as far as the most effective way to have funds managed.  There are three main offerings to consider when pursuing potential managed forex account solutions: the MAM Terminal, PAMM Terminal, and replicators.  Each of the solutions has their own benefits and drawbacks, and picking the best solution for a potential account holder depends on investor’s needs and wants.

The MAM Terminal

A MAM system or Multi Account Manager is a platform specifically designed for use by money managers.  It is an application integrated with MetaTrader 4 which is among the most popular online trading platforms.  The proliferation and popularity of MT4 (MetaTrader 4) amongst brokers and market-makers makes this a very comprehensive solution for managing client accounts.  The software enables block orders while allocating such orders to client accounts depending on the setup.  This allows a money manager to manage multiple accounts at once from one platform while distributing orders to client accounts.

The benefits for managers is the ability to manage an unlimited number of accounts from a single terminal with three different allocation methods including lot allocation, percentage allocation, and proportional allocation.  This is beneficial for small clients as the minimum trade size allowed is 0.01 lots and can enable managers to have multiple master accounts focused on different strategies.  This system also allows for automated strategies to be executed while accepting all major order types (market execution, limit orders, stop orders).  For clients, this is also beneficial because it allows them to see results in real-time and makes it easy for the money manager to send performance reports to clients.

The PAMM Terminal

A PAMM Terminal or Percent Allocation Management Module is similar in design to the MAM solution, however, has a few notable differences.  Like the MAM solution, PAMM accounts enable a money manager to consolidate an unlimited number of sub-accounts under one platform.  The money manager therefore sees a consolidated account statement with the trades being allocated proportionally to the amount of funds in an account.  Just like the MAM option, PAMM offers all the same order types.

From a money manager’s perspective, the PAMM terminal offers the benefit of using smaller trade increments than MAM solutions as the division of accounts is usually done on the back-end, integrated directly with a broker.  PAMM accounts also offer less latency than MAM solutions as MAM accounts see orders executed individually in each account, versus a PAMM solution which manages the funds of all sub-accounts directly and executes all orders in a block.

The one drawback is monitoring performance from an investors-side.  Accounts are updated to reflect closed positions and monitoring open positions is not possible with this solution.  However, monthly and quarterly reports are

Replicator Solutions

Trade replicators have been around under different names for years.  Recently, copy trading has been made a popular amongst brokers and market-makers looking to provide other services to clients that wish to take a more hands off approach to trading.  Trades mirror those of the account being replicated without complicated steps.  These plugins are designed for ease of use and are linked to accounts very quickly.  The benefits are support through brokers that offer MT4 solutions and there is no money management paperwork.  Real-time performance visibility is also available, making this a transparent solution.  However, the downside is that replicators and copy-trading are not often provided by regulated money managers. Without licensing, accountability and credibility can be suspect.  Certain solutions also suffer from higher latency than PAMM and MAM options.

All managed forex accounts solutions have their respective benefits and drawbacks, but the benefit of having options to choose the right solution for your account reigns supreme.  The different options make finding a suitable solution easier, but it is worth defining expectations before deciding on the right solution for your investment needs.

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Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.