Trust management of money

It so happened that in the human society there is a constant question of trust. We can service our car ourselves, but we trust its service to professional locksmiths, we can teach our children various educational disciplines, but we trust professional teachers. Similarly, the situation is also with investors, who usually use trust management under the management of professional traders.

In the Forex market, trust management is the allocation of the right to manage the investor’s money.

Investments in Forex

On the Forex market, trust management of money is divided into two types:

  1. Direct individual trust management is the absence of any mediators. The relationship between the investor and the manager is extremely direct.
  2. Trust management on Forex with the involvement of mediators. This type of relationship between the investor and the manager is  PAMM accounts in the classical sense of Forex market.

Distinctive features of the trust management

Direct individual trust management on Forex has a number of distinctive features:

  1. All funds of the investor are on his personal trading account, and the manager is deprived of the right and the ability to conduct any other operations excepting the trading operations.
  2. The manager has the full right to perform any trading operations at his discretion, and also at any time to monitor these operations in real time.
  3. The benefit of the managing trader on Forex is the percentage of the profit provided for the investor. The amount of remuneration is regulated by the contract of trust management of cash.

Trust management of funds with the participation of mediators

As a rule, an intermediary in the trust management of money on the Forex market is a broker who acts as an mediator, which creates in its office services for maintaining the PAMM-account. The PAMM-account is managed by the manager, and the investor transfers funds to the PAMM-account. The difference is that a broker who provides the ability to maintain PAMM-accounts is a kind of guarantor of the fact that the investor has the ability to constantly monitor trading operations, and the manager receives his specified percentage of the profit for managing money.

The procedure for transferring funds to trust management

When investors decide to switch to trust management of Forex, it is necessary to solve this issue in stages:

  1. Money management on Forex begins with the searching for a manager. It can become a separate trader, and a whole group of traders, working under the same name.
  2. At the second stage of capital management on Forex there are negotiations of the investment terms where the first question is  the remuneration of the manager. It is also important to discuss the maximum limit of «drawdown» upon which trade ends. This will protect the investor from a significant loss of cash. This issue is very important, because investing on Forex is always a risk that must be thought in the details.
  3. When all the details of the Forex trust management are agreed and written out in the contract, you must select the broker who will  serve the PAMM account. After opening an account, the investor will receive a login and password for monitoring the trading operations. The manager will receive his requisites to enter the trading terminal, where he will conduct trading operations.
  4. After that,  the investor need to replenish the account for the amount that was originally negotiated, after which the manager can start trading.
  5. After passing through the previous stages, the investor can only monitor the activities of the managers and pay the compensation on time.

Which is better: direct DM or PAMM-account

In fact, when answering the question about what trust management is in the Forex market, it is necessary to understand that this is a «double-edged sword». On the one hand, the manager is much more convenient to work through the PAMM-account, because he gives a guarantee that his trading operations will not be disclosed and his trading strategy will remain a secret. Also, the managing PAMM-account is rewarded automatically.

In turn, the investor as a rule is more convenient for direct trust management, because it is easy to take control of your account in any case and, if necessary, change passwords for the manager and not only that.

But such arguments were valid only in the old classical sense, but in fact the management on Forex  has long been practiced by brokers who develop the most different conditions of the PAMM-account, which are convenient, both for the investor and for the trader.

Pseudo-based trust management

It is very important to know about the existence of pseudo-trust management of money on the Forex market. Pseudo-trust management technically treats itself just like a real DU, but it is not.

The real trust management of finances consists in transferring a trading account under the management of a professional trader. In pseudo-trust management, as a matter of fact, not a trading account is transferred under management, but the funds themselves in order to increase them. In other words, in the real trust management on the Forex market, the manager has only the opportunities that allow him to carry out trading transactions on the Forex market, whereas in a pseudo-DU, the account for trading on the Forex market is masked, and in fact the manager can dispose the money as it is, and it is not excluded that the money will be used in a completely different direction, not connected with the currency market of Forex.

Of course,  the investor does not care how his money is used in the event that they ultimately bring the declared profit. But we need to understand that under pseudo-trust management there can be not only a honest company, but also any fraudulent structure.

To avoid falling into the tricks of scammers, you need to understand a few simple rules:

Pseudo DU, behind which scammers stand, attracts its customers with the highest profitability. For example, if a bank deposit is able to give 8-12% of profit per year, in case of a facing with scammers, they will offer such a profit in just a few weeks.

Excessive loyalty to investment conditions. Scammers will offer the lowest percentage of remuneration for the manager, and also they will offer to start with the most insignificant sums up to several dollars.

In the case of a real trust management, the manager can dictate tough enough conditions for cooperation, because to obtain a good profit it is important for him to have either a high interest rate or a serious investment amount, and sometimes both requirements at once.

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  • Tuesday, December 15, 2015
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