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How I choose PAMM Investment Accounts: revisited

Last updated on 2020-06-10

Disclaimer: This post is for informational purposes only and is not financial advice.

In PAMM Accounts: How I choose investments I explained my criteria for selecting a $1000 PAMM account FX portfolio, essentially based on historically low-volatility accounts. I called the portfolio JagzFX Tranquility. Three months on, the good news is I have not lost money. The less-good news is that I haven’t exactly made much either! As I write, the portfolio is up 2% on the starting balance. However, the balance has fluctuated around breakeven and there is no clear sign of which direction this portfolio will take. It remains to be seen if the performing accounts can outweigh the non-performing accounts, and produce a reasonable return over time.

JagzFX Tranquility PAMM Portfolio Update Jan 2020
JagzFX Tranquility PAMM Portfolio Update Jan 2020

Herd Instinct

As a second experiment in portfolio selection, I’ve decided to take a less technical approach and use mainly herd-instinct to select accounts. Herd Instinct simply means doing what the majority are doing (rather than doing your own analysis, which is what I did in for JagzFX Tranquility). In stock market trading, Herd Instinct can lead to sudden rallies and sell-offs, market-bubbles and market-crashes.

Similarly, in FX trading there is a tendency for large groups (herds) of traders to set the same stop-loss price on trades, creating opportunities for others to go stop-hunting.

But what if, instead of stocks and shares or currency prices, we use a follow-the-crowd approach to select the accounts for an FX PAMM Portfolio?

PAMM Account Selection Criteria

The approach is simple: Invest in the ten accounts that have been trading for at least 1 year, are profitable, and have the largest number of investors.

On the Alpari platform, these are the filters used:

ParameterSettingRationale
DenominationUSDOn Alpari, my base currency is USD. To avoid exchange rate charges when investing and withdrawing, I select only accounts denominated in USD.
Open for InvestmentYesShould be obvious: the account needs to be accepting investors.
Age> 1 YearI only want to invest in accounts with at least 1 year of trading history.
Return (1 Year)>= 40%What return you choose depends on how adventurous you are. Since I achieve yields over 40%/year on some of my strategies, I’m looking for accounts better than my own.
Return (6 months) >= 10%Filtering out any accounts that have not performed over the last six months.
InvestorsSort DescendingI want the accounts with the highest number of investors at the top of the list.

At the time of writing, the list looks like this:

JagzFX Herd Instinct PAMM Account Selection Jan 2020
JagzFX Herd Instinct PAMM Account Selection Jan 2020

Each of these accounts has a significant herd of Investors, ranging from the lowest with 208 up to the highest with 4550.

Click here to see the current list of ‘Herd Instinct’ PAMM Accounts on Alpari.com

Building the JagzFX Hoi Polloi portfolio

To put together the portfolio, I simply select the first ten accounts from the sorted list. As before, I have funded the portfolio with $1000 and distributed this evenly amongst the ten selected accounts.

View the current status of the JagzFX Hoi Polloi herd instinct portfolio on Alpari.com.

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