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PAMM (Percentage Allocation Management Module): A system that allows investors to allocate funds to a professional trader, who manages and trades the funds on their behalf. Profits and losses are distributed according to the proportion of each investor’s contribution.
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High Watermark: A key concept that ensures investors only pay performance fees on profits that exceed the highest level their account has reached. If the account dips below this level, the trader must recover losses before charging any further fees.
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Master Account: The account managed by the strategy provider, pooling funds from investors. Trades executed in the master account are proportionally distributed across investor accounts.
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Stop Out: A level at which a strategy is automatically unsubscribed due to insufficient margin in the investor's account. This occurs at 20% of the margin level to help prevent excessive losses.
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Margin Call: A warning that the account's margin level has fallen to a certain threshold (90%), indicating that additional funds are required to maintain open positions.
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Master A/C No: The account number provided by the Money Manager, which is needed for subscribing to a strategy.
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Performance Fee: A fee paid to the strategy provider based on the profits generated. It is typically calculated after surpassing the high watermark.
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Subscription: The process of allocating funds to a specific strategy by an investor, allowing the strategy manager to trade on the investor’s behalf.
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Unsubscription: The process of exiting a strategy, where an investor’s account is no longer linked to the master account for that strategy. Any remaining funds are trades are closed are withdrawn back to the investor's live trading account.
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Top-Up: The action of adding additional funds to an existing subscription in a strategy, which increases the total amount being traded by the strategy provider.
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Partial Withdrawal: The process of withdrawing a portion of your funds from a strategy while still remaining subscribed. This reduces the amount allocated to the strategy without fully unsubscribing.
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Balance: The total amount of money in your account before considering any open trades. This reflects your account status without any floating (unrealized) profits or losses.
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Equity: The current value of your account, including both the balance and any open positions' unrealized profit or loss. Equity fluctuates based on the performance of open trades.
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Unrealized Profit/Loss (P/L): The profit or loss from open positions that have not yet been closed. These are also called "floating" P/L, as they reflect the market's current movement but are not locked in until the trades are closed.
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Realized Profit/Loss (P/L): The profit or loss from trades that have been closed. Once a trade is closed, the profit or loss is added to the account balance, making it a realized P/L.
These terms will help you better understand how the PAMM system works and the important factors to consider as an investor in a strategy.
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