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.
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:
|Denomination||USD||On Alpari, my base currency is USD. To avoid exchange rate charges when investing and withdrawing, I select only accounts denominated in USD.|
|Open for Investment||Yes||Should be obvious: the account needs to be accepting investors.|
|Age||> 1 Year||I 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.|
|Investors||Sort Descending||I 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:
Each of these accounts has a significant herd of Investors, ranging from the lowest with 208 up to the highest with 4550.
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.