Last updated on 2020-01-21
Disclaimer: This post is for informational purposes only and is not financial advice.
In a previous post, I covered the unexpected, and in my opinion misjudged, change to the Alpari’s PAMM account ratings.
One positive consequence of falling into distrust of their rating system: it forced me to develop my own. Fortunately, Alpari has left the tools in place to sift through and find potential investment accounts; but they take a little finding.
When you first view the Alpari PAMM Account Ratings, you are presented with quite a limited view similar to the one below. (see the live version here)
This is the what Alpari call the Dynamic rating. As I have mentioned before, ranking 9-day old accounts at #1 and #3 is not the kind of advice I am going to be following!
The wood from the trees
Fortunately, Alpari provides a more sophisticated grid that can be customized to show, filter and sort a wide range of account parameters. It can be a bit tricky to find on the website, but the direct link is https://alpari.com/en/invest/pamm/?layout=grid.
Notice how there are now two Ranking columns: Dynamic and Conservative. Clicking on Conservative provides a different sort of the table, with the more mature accounts at the top. This is how the Alpari ranking was sorted before the view was changed to Dynamic.
This is already a more understandable ranking of the PAMM accounts, and we can use the boxes a the top of the table to filter and sort the accounts in other ways. But there are many more parameters than shown here. Clicking on the cog-wheel icon reveals many more columns that can be used to filter and sort the list to our preferences.
Finding the needle in the haystack
For my portfolio, I am looking for mature, profitable PAMM accounts with low volatility. There could be different ways to identify them, but these are the filters I use:
|Risk Level||<=3||Alpari’s Risk Level is a good overview of daily fluctuation on the account. Too much volatility suggests a lack of risk management, so we want to filter those out.|
|Open for Investment||Yes||No point even looking at an account if I can’t invest in it.|
|Age||> 1year||Statistics on new accounts are extremely unreliable. The markets change over long cycles. Therefore, you need to check an account’s leverage and other risks over significant periods.|
|Manager’s Capital||>= $3000||I only want to see accounts where the trader (manager) has significant skin in the game and carrying some risk of their own.|
|Manager’s Remuneration||<= 40%||Remuneration is the percentage of profits that the trader (manager), gets to keep. The account may be making 50% per year, but if the manager keeps half the profits, then I only make 25%. There are plenty of good accounts with less than 40% commission, so why bother with the greedy ones?|
(All-time & 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. I set >40% for both the all-time result of the account and for the last year. I’m looking to filter accounts that had a stellar first year but are not so profitable recently.|
|Sort Ascending||I do not set any limits on volatility, but I do sort the table so that the lowest volatility accounts at the top.|
And the winner is …
So putting that together, I proudly present The JagzFX PAMM Account Ratings.
Finally, it comes down to personal judgement on which of these accounts are worthy of investment. At this point, I pull up the individual accounts and study the detail. Unless the account is published elsewhere (e.g. Myfxbook), you cannot view the actuate trading history, only the start. The features I look for include:
- The return chart shows reasonably consistent gains. A little bit of wobble is OK, too much is a concern. But, if the graph is too smooth, it might indicate a no-loss strategy; martingale?
- The Leverage chart shows careful control of risks. If the account is using very high leverage it suggests an aggressive strategy. If there are jumps in profit following spikes of high leverage, that also suggests martingale.
- The volatility is reasonable. Generally, I will reject any accounts with a volatility of over 5%.
Putting my money where my mouth is
So will it work? I’ve added new PAMM Portfolio and funded it with $1,000. I’ve allocated these funds across 14 accounts that met the above criteria (plus my personal preferences). I will review these accounts periodically and, where appropriate, swap them out for better candidates.
As I alluded to earlier, success is for the JagzFX Tranquility PAMM portfolio to perform equal or better than my trading, and gain over 40% in a year.