You must have been known that a PAMM account rating is better than a PAMM account non rating. But how confidence we are that the higher ranked a trader, the better his performance?
The ranks within the PAMM account rating are designed to give an optimal result to the investor in term of both the profit and the risk side. How do these all things work?
The performance determination to rank the PAMM account rating is calculated from some criterias as listed below :
Profit is surely be the most sought by investors. The bigger profit, the better credit point owned by a trader. There is a smart way to see this profit, which is done by calculating his latest 3 months and 6 months profit. We can also calculate profit within the time he has been traded, from the first time he made trading until present. This is so called “profit all the time”. By calculating the present profit, we are protecting investors. Sometimes there is a trader with a huge profit but in reality his present profit is not quite good or even decline. We can put an example. Let’s say that a trader has been trading for 3 years with a satisfying result, but in the latest fiew months his performance are getting low so his rating will also decline.
We can simply say that leverage is like a mechanical advantage. It is highly favored by traders especially forex traders because they will be able to make a big tansaction with small capital. With the available leverage which is almost 1:500, traders are able to get transactions with only one five hundredth in capital. But it is like a two-sided sworn too. If they don’t have prudence in doing transactions so their lost will be faster,and even bigger than their capital. To minimize their risks, traders must have a daily average leverage, and a maximum leverage used as minimum as they can. Traders whose ranks are good, will make good profit, have a small daily average leverage and also a small maximum leverage.
Although a leverage indicator has been showing a trader’s prudence, but there is a calculation on capital using. A trader will be stated as a good one, if he shows a real and small decline equity. Drawdown is definitively “The peak-to-trough decline during a specific record period of a trading”. What is calculated in here is a maximum drawdown as the rank criteria. A good PAMM trader is the one who has the smallest decline equity percentage. He will also be said has a rare loosing possibility in term of risk. So if the investors make investment to this kind of trader, the possibility of their loosing will be quietly low.
At the end, a PAMM trader who has a high profit, small leverage and drawdown will have a better rank, compared to another trader. It means that you, as the PAMM investor, has been protected by the performance ranking.
Happy Investing !