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17 August, 2021
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17 August, 2021

What is a Money Manager?

A Money Manager is a professional trader who manages third-party funds using an operations platform that allows assigning, based on various parameters, the volume of operations that each of the client’s accounts will receive.

How does a Money Manager make money?

A manager can generate income through two main sources:

Pay for Profitability

Payment for Traded Volume

Pay for Profitability

Managers usually receive a payment as a percentage of the profitability generated in their clients’ accounts.

For example, suppose that a manager charges 20% on the profitability generated. This manager has a client with an initial capital of US$ 1000 and after a month of operations manages to bring the account to US$ 2000.

This means that the Manager will receive 20% on the US$ 1000 of profit, that is, US$ 200 as payment on the generated profitability.

Pay for Volume Traded

Some brokers also allow Managers to receive payment for the volume of lots traded on their clients’ accounts.

This is the type of payment that is made to Introducing Agents or IBs, however, some brokers allow Managers to also be listed as IBs.

For example, suppose the Manager will receive US$ 10 for each lot traded. That means that if after a month, a client’s account has generated 1000 lots in volume, the Manager would receive a payment of US$ 10,000.

What type of Trading Account does a Manager use?

The accounts most used by money managers are:

PAMM Account

This account also allows you to manage positions in multiple accounts at the same time.

The main difference is that, unlike the MAM account, a PAMM account only offers one way to assign trades.

The PAMM uses a percentage allocation method which assign trades based on the % that the capital of each client represents from the total.

What are the requirements to be a Manager?

Legal Documentation – Money Managers must sign a legal document called LPOA, in which each client gives them the power to place operations in their trading account.

Consistency – The way to attract clients is through a consistent strategy and with results. If you have not yet reached consistency in your trading it is unlikely that you can be a Money Manager.

Having clients – To be a Manager it is an essential requirement to have clients to be able to link them to your MAM or PAMM account.

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