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PAMM vs Copy Trade

PAMM vs copy trading is a comparison of two very similar forms of trading and both are very popular in the current market as these methods literally save time and are very convenient for people looking to balance their busy lives.

PAMM vs Copy Trade

It is important to understand the nature of both types of accounts, and an important caveat remains: no trade is risk-free.

These methods make trading much more accessible to the general public and greatly reduce entry barriers that often restrict new entrants into the forex market.

KEY TAKEAWAYS

  • PAMM trading and Copy Trading are both quite effective methods to profit from passive trading and they do share many of the same attributes.
  • The copy trading method allows an investor to automatically copy every transaction made by another trader to their personal account.
  • PAMM is a form of Forex trading using combined money, where an investor can allocate their money to managers of their choice. Managers, in turn, can manage multiple forex trading accounts using their own capital and pooled money in order to make a profit.

PAMM vs Copy Trade

PAMM trading and Copy Trading are both quite effective methods to profit from passive trading if used properly and they do share many of the same attributes.

Many reputable brokers offer these services. It is up to investors to do their due diligence in balancing fees and commissions against their free time and goals in trading forex.

The main point of difference between these two methods is in control over investors' funds.

  • With a copy trading account, the investor can make decisions, this is not possible with a PAMM accounts. In fact, with a PAMM account, the money will be entrusted directly to a professional, who will use it to open and close operations.
  • Another difference is commissions. With a PAMM account, there is often only one fee, the standard spread that the fund manager pays for opening trading positions. With copy trading brokers, however, there will be the spread and a commission charged by the copy trading platform.

What is PAMM Trading

PAMM is a form of Forex trading using combined money, where an investor can allocate their money to managers of their choice. Managers, in turn, can manage multiple forex trading accounts using their own capital and pooled money in order to make a profit.

Since the investor has no control over the trade once it has been executed, it is important to choose the right manager. The investor can choose from many candidates on the platform where they will add their track record to their profiles, so it is better to choose one with decent past performance. Remember that the money manager can be abandoned at any time.

Advantages

  • Investors do not need to be an expert to open a PAMM account. This will save some time and effort depending on the goal investors have in mind.
  • Opening a PAMM account can be an easy way to enter the forex market without direct involvement.
  • Since money managers are experts in their field, the chances of success are higher.
  • PAMM is very transparent as a trader can choose who to work with and what asset to invest in. It also enhances trading security as both brokers and money managers must comply.

Disadvantages

  • There is a risk that the deal may not work, and investors must accept the consequences regardless of the outcome and pay a fee to the manager.
  • The more experienced the manager, the higher the fees and commission. Even in this case, there is no guarantee that the transaction will be successful.
  • Traders have no control over a trade once it has been executed. The trader must have full confidence in the money manager to do all the work and get some money back.

What is Copy Trading

The copy trading method allows an investor to automatically copy every transaction made by another trader to their personal account, which does not involve transferring the investor's funds directly to the fund manager. Trading accounts can simply be connected to copy trading platforms to replicate trades of signal providers.

Advantages

  • Traders get the opportunity to follow and duplicate the trading of experienced Forex traders.
  • Transactions are automatic - it's easy to execute.
  • No trading experience is required to open an account because the trader simply selects a strategy from a signal provider and copies it into his own portfolio.
  • Traders can follow more than one signal provider.
  • The trader still has full control over the investment and can change the parameters at any time as they wish.
  • You can choose different strategies and execute them at the same time to diversify your portfolio.

Disadvantages

  • There is no guarantee that the transaction will be successful. A trader must rely entirely on the strategy to make a profit.
  • The spread in copy trading is usually above average.
  • Different brokers offer different commission rates, which usually depend on the success of a particular signal provider. By choosing a high level strategy provider, traders can only pay more for an increased chance of success.

Bottom line on PAMM vs Copy Trade

Each option essentially has its advantages and disadvantages. Hence, there is no definitive answer as to which one is better than the other.

Everything depends on what the investor is pursuing, namely, how much he wants to participate in the trading process, whether he has sufficient knowledge and, most importantly, whether he has the time. There are also some factors to consider, such as the cost of trading and the broker's offer. In the end, whichever type you choose, make sure it suits your goals and preferences.

It is important to create a balanced portfolio and do your due diligence before making any major decision.