MT4 MAM is a solution for the MT4 trading platform that allows a trader without the skills to trade on an exchange or sufficient time to do so, to delegate their funds to a more experienced trader to trade on their behalf. MT4 MAM accounts make use of combining individual trader accounts into a large managed pool fund that comprises individual trader accounts.
In this case, the more experienced trader is called a money manager. And those who entrust their money to him are considered investors. Money managers can manage the funds of several hundred investors at once. A money manager typically receives a fee for his work, which comprises a percentage of successful transactions.
Along with MT4 PAMM and CopyTrader, MT4 MAM is one of the three types of investment solutions for the MT4 platform.
MT4 MAM: the Case of Takeprofit EasyMAM
Mixed forms of active and passive money management are increasingly more prevalent today than pure MAM or PAMM.
Let’s take Takeprofit Multi Account Manager as an example. It is a combination of PAMM and MAM. In this solution, each investor has their own separate account in a combined fund managed by a money manager. An investor can track everything that happens in the account: how much money is in it, what transactions are open, what profits are gained. However, the investor cannot perform any operations besides entering and exiting.
At the same time, the distribution of money from a money manager’s common pool to investors’ sub-accounts happens automatically in proportion to their contribution. The money manager simply trades on a large account, just as in PAMM, but this account is divided into many separate sub-accounts, like in MAM.
All three stakeholders benefit from this form of account management.
The Benefits of Using MT4 MAM
For an investor
The benefits for a trader who invests in MT4 MAM is that their money is managed by a more experienced trader. As a rule, the manager has one or several tried and tested strategies, is well-versed in trends, and is capable of sensing the slightest market fluctuations. Therefore, a trader who is not skillful enough yet or does not want to trade can minimize his losses.
For a money manager
A manager works either for a percentage of successful transactions, or for any combination of salary and a percentage. Meanwhile, he risks the investor’s money, rather than his own. With a certain amount of luck and perseverance even a novice trader can become a manager. This will give him the opportunity to establish his own capital from scratch using only his clients’ money.
For a broker
Forex brokers encourage and develop all forms of passive and active money management. It’s a way for them to attract an audience of both experienced and fledgling traders, thus increasing trading volumes, which means greater profits. What leads to an increase in trade volume?
First of all, people who enter the exchange for the first time usually prefer to risk small amounts and trade infrequently. Watching a training course, reading relevant books or consulting with friends – all of this takes time. Money managers risk nothing by investing money that is not their own, so they trade and risk more often.
In addition, since one manager may be trading with the money of dozens of investors, he can afford to stake much larger amounts.
The third benefit for a broker is that investors trust an experienced player with a greater amount than they would dare to risk on their own.
As a result, the broker earns more:
- on commissions for allocating and storing money in the account;
- on transaction commissions;
- sometimes on profit commissions.