Managed Forex Account

A managed Forex account is a type of account where a professional money manager trades on behalf of the client for a fee. This allows investors to save time, earn stable returns, and reduce their overall portfolio risk.

Investors can choose from various types of managed accounts, but we focus on PAMM, LAMM, and MAM accounts. These three types offer greater flexibility, low entry requirements, and anti-fraud protection. PAMM investors deal directly with their chosen Forex broker, while money managers have no access to the investor’s capital.

 

💼 What is a Managed Forex Account?

A managed Forex account is a segregated trading account owned by each investor but managed by a professional money manager. Such accounts should provide safety, transparency, flexibility, and full control.

Key Features

• Professional Expertise: Gain access to experienced traders without requiring personal market expertise.

• Hands-Off Investing: Avoid spending time on chart analysis or trade execution.

• Transparency: Monitor trades live through your brokerage account.

• Risk Controls: Managers typically implement tools like stop-loss orders, position sizing, and diversification to manage risk.

How It Works

(1) Account Setup: 

• Open a forex trading account with a broker that offers managed account services.
• Provide a limited power of attorney (LPOA) to the manager, enabling them to trade on your behalf without access to withdraw funds.
• You keep full ownership and control over withdrawals.

(2) Capital Allocation:

• Fund your account (minimum deposits typically range from $5,000 to $50,000 or more).
• The manager may combine your funds with other investors’ capital or manage it separately.

(3) Trading Execution:

• The manager implements their chosen trading strategy—whether algorithmic, discretionary, scalping, or swing trading—to place trades.
• You receive consistent performance updates, either daily or weekly.

 

💵 General Types of Managed Accounts

There are five general types of managed accounts: individual, pooled, PAMM, LAMM, and MAM.

(a) Individual Accounts

This classic account type refers to an individual account managed by a professional on behalf of the investor. Typically, minimum deposit requirements exceed $10,000. Management fees are customizable but usually performance-based.

• Requires careful consideration

• High deposit requirements

• Customizable fees

(b) Pooled Accounts

Pooled accounts involve multiple investors combining their capital into a single fund to share fees, profits, and losses. Compared to individual accounts, pooled accounts have lower deposit requirements, starting as low as $2,000. However, there is usually a minimum holding period before investors can withdraw funds without penalties.

• Lower deposit requirements

• Shared expenses and standard fees

• Minimum holding period before withdrawal

• Penalties for early withdrawal

(c) PAMM, LAMM, and MAM Accounts

These managed account types use software to allocate gains, losses, and performance fees proportionally to each investor. Their main advantage is fraud protection, as investors deal directly with their chosen Forex broker, and money managers have no direct access to the investor’s capital. Additionally, minimum capital requirements are low, starting as little as $500.

• Lowest deposit requirements

• Standard fees

• No minimum holding periods before withdrawal

• Advanced flexibility and fund safety

• Allows portfolio diversification through limited capital allocation

Advantages of PAMM/MAM Accounts

1. Investors retain full control over their account balance and can withdraw funds at any time.

2. Money managers trade the accounts but cannot access the investor’s account balance.

3. Investors save time and benefit from a wide selection of successful money managers.

4. Investors can monitor their managed accounts in real time, including profits, losses, balance, and all open and closed trades.

5. Depending on the agreement (LPOA) between investor and manager, investors may have the option to place their own trades on the managed account. More details on the LPOA agreement follow.

LPOA (Limited Power of Attorney Agreement)

An LPOA allows one person to authorize another to manage specific financial activities on their behalf. It establishes the legal framework for the agreement between the parties and outlines the money manager’s success fees, as described below:

• Management Fee: …………….. % per ……………..

• Incentive Fee: …………….. % calculated and paid……………..

 

 

🎯 PAMM, LAMM, and MAM Accounts Explained

Investors can choose among PAMM, LAMM, and MAM account types, each using different software technology to allocate gains, losses, and performance fees proportionally to each investor. The main advantage of these accounts is fraud protection, as investors deal directly with their chosen Forex broker, and money managers have no direct access to the investor’s capital.

 

(1) Multi-Account Manager (MAM) Accounts

A MAM account lets a money manager handle multiple investor accounts via a single terminal, usually the MT4 multi-terminal. When a trade is executed on the master account, it instantly reflects on all linked investors’ MAM accounts. MAM accounts offer maximum flexibility and control.

Key MAM features:

(i) Combines features of both PAMM and LAMM accounts

(ii) Money manager earns a performance fee based on returns

(iii) Each investor can set individual order execution parameters

(iv) Investors can modify any MAM trades at any time

(v) Investors can place their own trades within the same account

 

(2) Percentage Allocation Management Module (PAMM) Accounts

As the name suggests, PAMM accounts allow investors to allocate a percentage of their capital to the master account, reducing risk exposure. Investors can also follow multiple money managers within the same account to diversify their trading.

Key PAMM features:

(i) Money manager earns performance fees based on returns

(ii) Gains or losses are distributed based on each investor’s percentage allocation

(iii) Allows real portfolio diversification by allocating small portions to different managers

 

(3) Lot Allocation Management Module (LAMM) Accounts

LAMM accounts let money managers specify the number of lots to be traded in each investor’s account. This allows different leverage levels across accounts.

Key LAMM features:

(i) A variation of PAMM designed for large investors

(ii) Helps reduce risk for accounts with large cash balances

(iii) Performance fees are based on the multiples of lots invested

(iv) Profits and losses are distributed according to the lot multiples invested

 

📝 Opening a MAM/PAMM Forex Account — How It Works

(i) The investor selects the managed account type that suits their needs (PAMM, LAMM, or MAM)

(ii) The investor opens a trading account with a regulated Forex broker offering the chosen account type

(iii) The investor chooses money managers deemed reliable based on professional experience and at least two years of performance history

(iv) The investor signs an LPOA (Limited Power of Attorney) agreement, allowing the money manager to trade the account

(v) The investor funds the account and sets trading parameters

(vi) The money manager begins trading, but the investor retains full control and access

(vii) Investors can revoke the LPOA agreement at any time

 

⚖️ Compare MAM/PAMM Managed Forex Accounts

Here are some regulated Forex brokers offering PAMM/MAM managed Forex trading accounts:

■ Managed Forex Accounts

G.P. for ForexExperts.net (c)