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.
It is undeniable that PAMM investment is a tempting investment and most of the traders who do their tradings in forex instrument are chasing pretty good return. But, being traders means that they also make mistakes sometimes and get lost. Their picture of losses are indicated by a Maximum Drawdown.
In many things within this forex world, the emotional side of the traders are holding the important role. The professional PAMM traders have become experts in managing their emotion. And when the bad day comes to them as a Maximum Drawdown, they are able to keep continuing their tradings without making any bigger mistakes. That’s why it is not easy to be a successful professional PAMM trader. It’s only 5% from all traders in the world who succeed in making a consistant profit. Since the PAMM investment is a smart way to invest your money, it’s not wrong for you to choose it as your instrument of investment.
A PAMM trader could rise and make another growing profit after his losing, and even cover up his Maximum Drawdown amount. This is what we call the Recovery Factor indicator. The definition of the Recovery Factor in the PAMM world is stated below :
Recovery Factor is the indicator that shows the effectiveness of the PAMM system after the Maximum Drawdown took place. If the Recovery Factor is less than unity it means the account haven’t recovered from the Maximum Drawdown yet. If the Recovery Factor is greater than unity it means the investment accounts successfully recovered from the Maximum Drawdown.
It is very important for a PAMM investor to ensure that the selected PAMM manager is a quiet good PAMM trader who are able to manage his lost, which is by making a good profit. I call this kind of PAMM trader as a strong trader. He has a very good energy to recover from his lost. This kind of PAMM trader is really well trained in term of skill and emotion that make him posses a very good record in recovery factor.
It is good for you to select PAMM trader whose recovery factor is at least > 1 so as the investor, you could hope that he will be able to return or recover his lost by making a profit, if something bad takes place.
Just like profit that has a continually increased profit value, if this recovery factor keeps growing from one month, three months, six months, and a year, so all the time it will be very good. But usually, it will be difficult to happen. Thus, the all time recovery factor indicator is enough to describe if a particular trader is the right choice for you.
Happy investing in the PAMM investments.