There 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.
There is one more indicator that can be used as a reference for the PAMM investors to select the PAMM traders. The indicator is called volatility. There are three types of investors and traders in doing transactions. They are aggressive, moderate and conservative type. The aggressive type, will give us a quiet high profit but the possibility of losing is also high. If you are PAMM investor and select this type of trader, you must ensure your trader has a good profit and a high volatilty so you may hope a high and fast return. Just remember that it will apply the same if you loss.
The definiion of Volatility is the average from all daily result transactions (both profit and loss) sice the date that account was opened. Volatilty is measured with below formula :
- Pc means share price at the closed of the day
- Po means share price at the open at the day
To know how far the standard range of this volatility value is, there is a very correlative indicator which is called risk level. Risk level will be very easy to be seen because it is not in the form of an absolute volatility value but in the form of range risk level.
The risk level here will represent the level of aggressiveness of a particular PAMM trader.
Risk level 1 = volatility 0 – 1%
Risk level 2 = volatility 1 – 3%
Risk level 3 = volatility 3 – 5%
Risk level 4 = volatility 5 – 7%
Risk level 5 = volatility > 7%
So, it is very easy to see that a trader with risk level 5 has a very high volatility. We can call him a very aggressive type. If you want a conservative type, you must select trader with risk level 1, and if you prefer a moderate one you may select risk level 3.
With a high risk level, you may hope profit in a hundred or even a thousand percent within a year or even a couple months. Once again, profit is always walking together with risk. If you select an aggressive PAMM trader, someday he may give you a big loss too. So it is very important to diversify your accounts in order to balance your portfolio. You may also save some of your quiet big profit by making a withdrawal. Or, you can diversify your fund to another conservative PAMM trader.
Happy enjoying your journey in PAMM Investments!