Key to Markets PAMM vs other MAM systems

In this article we are going to discuss the differences between the PAMM offered by Key to Markets and the typical MAM system offered by other brokers.

Both systems have pros and cons. Key to Markets itself used to offer a MAM system in the past, but in order to meet the needs of both the Managers/Traders and the Investors a while ago we decided to switch to a unique PAMM system.

What is a MAM System?

MAM stands for Multi Account Manager, it is a software solution which allows you to control more than one account at the same time.
This could mean the ability to either place trades on the linked accounts (the “Slaves”) one by one from a single user interface or to place trades on a single Master account and then the MAM system allocates such trades on the linked Slave accounts using one of the  following allocation methods:

  • lot allocation: lots of the open trades are distributed either as pre-fixed amount or percentage;
  • proportional by equity or balance or available margin: lots are distributed proportionally to the capital or margin available;
  • lot multiplier: the Master trades on his own account a certain number of lots which is then replicated or multiplied in the Slaves accounts
  • variations of the above.

While these various allocation methods may make the MAM sound like a flexible solution, there are a number of downsides:

  • it is often difficult for the MAM system to calculate the correct amount of lots to be allocated, especially when the balance/equity size of the slave accounts is very different, thus in many cases the smaller accounts get no trades or other accounts get a disproportionate share of the trades placed by the Master;
  • if the Master opens a 0.01 lot position, this will be allocated only to one slave account (usually the one with the biggest balance/equity);
  • to be 100% sure that there are no discrepancies between the Master account position and the algebraic sum of the slave accounts, the Master will always have to perform at least a daily reconciliation;
  • dishonest Investors might “steal” the strategy of the MAM Manager by opening a small account under the MAM structure to be able to see the trades in real time and replicate them on another account (either manually or using a trade copier EA);
  • all of the Slaves/Investors have to download the mt4 platform in order to check the status of their accounts in real time;
  • the majority of MAM systems are not 100% safe for the Slaves/Investors as dishonest Masters could place/allocate losing trades on certain accounts and the winning trades on other accounts; new entrants (i.e. Slaves that join the MAM well after inception) are particularly exposed to the risk of getting allocated on their accounts losses resulting from pre-existing open trades;
  • with some of the above described allocation methods there could be a price slippage creating discrepancies between the entry/exit levels of the Master and the Slaves.

Key to Markets has been able to address all of the above issues through its powerful PAMM solution.

The Key to Markets PAMM system

PAMM stands for Percent Allocation Management Module.

With the Key to Markets PAMM system there is only one allocation method: “P/L allocation proportional by equity”.

This means that no matter how many lots per trade the Master opens on the trading account, what is allocated on the Investors’ account is not the lots, but the Profit/Loss (the “P/L”) resulting from the trading activity of the Master.

The P/L of both opened and closed trades is distributed on an hourly basis.

Conceptually the system works like a hedge fund or mutual fund where the NAV (Net Asset Value) is usually calculated once a month or once a day, whilst with the Key to Markets PAMM the P/L distribution happens every hour.

The advantages of our PAMM system are the following:

  • prevents unfair/arbitrary loss allocations, as P/L distributions of all trades happen every hour;
  • makes it impossible for the Investors to “steal” the Master Traders’ strategies as the precise entry points (price & time) are not shown immediately;
  • still gives full control to the Investors to enter/exit a PAMM at any time while checking the position of their accounts in real time and receiving a daily report via email;
  • makes the Investor’s life easier as there is no need to download the mt4 platform, all the account information can be checked through a simple web based interface;
  • makes the Master’s life easier as there is no need of reconciliation: trades and pending orders are booked on the Master trading account only, not on the Investors mt4 accounts;
  • allows the Masters to optimize their strategies as 0.01 trades are permitted, in fact the P/L of that 0.01 lot trade is distributed, not the 0.01 lot; this also reduces to almost zero the rounding issues of traditional MAM systems;
  • automatically manages the payment of performance fees and other fees while accounting for high-watermarks levels;
  • allows the setting of a wide range of fees: management fee (fixed or %), performance fee (flat or with thresholds), entry fee, exit fee (for early withdrawals); furthermore, all of these fees can be combined in customized “Offers” that the Investors can subscribe to

Additionally, the Masters can decide to make their track records public through our social trading page: pamm.keytomarkets.com

Thanks to this page, successful Traders can attract more Investors to their PAMM and thus earn more fee income.

Investors can better scrutinize the PAMMs thanks to the accurate statistics showing the performance of each PAMM Account.

PAMM vs MAM Comparison

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