Maximum Drawdown is an Indicator that Must be Considered by a PAMM Investor

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There are many criteria to select the PAMM trader you can explore as a PAMM investor, like maximum drawdown, return per risk ratio, recovery factor, volatility. Check this is out one by one the indicator.

Why do you make investment in an instrument of investment? Of course it is so easy to answer this question. The answer must be: profit. You can easily search and compare some instruments of investment which could give you the highest profit or the highest return. We want our money to work for us as maximum as it can. In the last article, we’ve already seen that forex is the instrument of investment which could give us a vey high profit. That’s why a PAMM trader choose the forex PAMM  as a  tool to gain pofit.

But it’s like in all instruments of investment, the pameo “high risk high return” will always attached. This will always work together, included in the PAMM  forex. Eventhough  you have given your investment to a PAMM Manager to manage  your money, you are still enabled to select traders, so that you are not leaving it all to them. You could read indicators and styles of each traders, and that is the beauty of the PAMM investment. In this kind of investment, you must be ready to get lost, but how to calculate your loss?

Being a trader, each of them must have lost in trading and sometimes in a quiet big amount. If you are jumping into the investment of PAMM  trader, your picture of loss is recorded statistically. So, what kind of picture indicates the experience of big loss that is used as the measurement? The indicator’s name  is Maximum  Drawdown.

The definition of the Maximum Drawdown is : the maximum amount lost from investor when investing in particular PAMM Account. It is calculated from the date it was opened by making a measurement of the largest distance between a high point and a following low point on the Rate of Return chart for the PAMM Account.

I’ll give an  example. Let’s say there’s a Maximum Drawdown at 25%, it means trader have the biggest lost at 25%. So if you  jump into the loop of the trader’s bad time, you will have the opportunity of being lost as big as the percentage amount  above. It is pretty sure  that a PAMM trader whose Maximum Drawdown is small will smallen the risk of decreased investment we put into. How big a Maximum Drawdown we must select? It mostly depends on  your acceptability for being lost.

There is one thing you  need  to concern  about. It’s the period of time of the Maximum Drawdown. You must select approximately one recent year because this is the  pretty good time to see the drawdown performance of a PAMM trader. The best thing is by selecting a PAMM trader who has the smallest Maximum Drawdown but also has a pretty good profit at the same time. Happy investing in the PAMM  investment.