What is Metatrader MAM and how does it work? What are the features of Takeprofit Metatrader MAM? What are the differences between solutions for different trading platforms?
How Does Metatrader MAM Works?
Metatrader MAM is a passive investment solution for Metatrader trading platform that allows newbie traders and those who don’t want to spend their time on trading to entrust their funds to professional traders verified by a broker. The participants of this process are often called investors and money managers.
Thus, Metatrader MAM accounts make use of combining individual trader accounts into a large pool of managed funds that comprises individual trader accounts, as well as investor accounts. The algorithm is as follows:
- Broker selects a money manager among his traders.
- Broker assigns investors to a money manager, and they allocate their funds to the money manager’s account.
- The money manager trades using the funds in his account.
- Profits and losses are automatically divided among investors based on their shares in the money manager’s account.
- Investors are able to deposit and withdraw money from their sub-accounts.
Differences between Metatrader MAM Solutions
There are Metatrader MAM solutions for both Metatrader platforms — 4 and 5. MAMs for different platforms from a single solution provider usually don’t have any major differences.
Vice versa, solutions for the same platform developed by different companies may function very differently. For example, Takeprofit Metatrader MAM for MT4 is an application that can’t interrupt the work of a Metatrader server. It can accommodate up to 20 000 investors. And the MAM for the same platform from Tools for Brokers is a plugin with 1 000 investors.
Advantages of Metatrader MAM for Brokers
Money managers mean guaranteed trading volumes for brokers. PAMM and MAM allow brokers to make more money. How exactly does it all work?
First of all, money managers have a bolder approach than traders. In a pooled account, the money manager will make more transactions with the client’s money and, probably, larger-scale transactions than the client himself would have made. It’s because the money manager is a professional with the time and a strategy. More transactions mean:
- additional commissions from traders’ money. For instance, a broker may charge a commission on the money invested, or simply interest per year.
- bigger commissions due to a greater number of transactions.
More active traders
Secondly, a money manager offers a chance to attract money from people who would not dare to trade on their own. Imagine the following situation: a trader opens an account with a broker and deposits $200. Then he starts thinking that it would be better to take a training course and read a book on trading first, soberly realizing that he knows nothing about trading and may easily lose. That’s where MAM comes in handy: it helps mobilize these people by offering them a chance to entrust their funds to someone experienced.
Background of Metatrader MAM
Initially, a trader’s money was deposited in a broker’s account. This trader didn’t really know how to trade, but he knew someone who was good at it. The trader gave this person the login and password from his account and asked him to trade using his account.
Money managers started creating Excel tables to store the access info for their clients’ accounts. They needed to log into the terminal every time to conduct a transaction on behalf of the client. At the same time, the trader remained completely in control. He could close out a transaction, and the money manager could see a transaction that was still open in the evening, but was no longer there in the morning. Also, the trader could change the password at any time and take back the control over trading from the manager.
The broker may not have even known that the client gave his money to someone to manage. He didn’t even always receive a commission in this scheme, unless he was the one to recommend the money manager.
Takeprofit Metatrader MAM
Takeprofit Multi Account Manager is a combination of classic PAMM and MAM. The solution lies somewhere in-between.
The feature specific to Metatrader MAM is that each investor account actually contains transactions with a specific volume, an open/close price, and its own profit – that is, it looks as if these transactions were actually made in the investor account).
The feature that comes from PAMM is the fair and proportional distribution of transactions, as well as the manager’s lack of control over the specific account where the transactions are opened and their volume. Trading takes place from a common pool, and sub-transactions are distributed automatically and proportionally to the amount invested.
Takeprofit Metatrader MAM allows you to assign clients in different groups with different markups. Markup refers to a broker’s markup to the spread, which constitutes his income.