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What is Forex investing?

People decide to invest in the Forex market for various reasons. But perhaps the main reason is that the profit-making capacity in the Forex market can be several times higher than that of classical methods of investing, such as buying real estate or making bank deposits.

Anyone who decides to make money on Forex is deciding: to trade on his own, or place funds under management. When a trader is trading on his own, everything is simple. He is just trying to predict the quotes’ future rates. And when he trusts someone else, then he has become a passive investor.

People who are not interested in the trading process, or who simply cannot succeed in trading for themselves, or who want to receive additional passive income without troubling themselves with the mechanics of self-trading become passive investors. Regardless of the reason to become an investor, to start investing in Forex, you need to take the following steps:

  • study all investment options available in the Forex market — PAMM accounts, trust management, and auto trading. But first, understand the differences between them;

  • check the list that contains the TOP most reliable Forex brokers that offer the most profitable investment programs;

  • choose a broker whose programs and conditions are right for you;

  • register with the official site of the broker you select (preferably through the site, so that later you get more income);

  • deposit into the account and transfer it to the selected investment program or selected portfolio on the broker’s website.

Choosing the correct broker is a key step because all financial transactions will be carried out through it. Without a broker, a trader can neither trade in the Forex market nor invest. It is the broker who determines the possibilities and limitations of the investor, the transparency of the process, and additional options for earning bonuses.

How to Invest in the Forex Market?

There are three main ways to invest in Forex: copying transactions of other traders (auto trading), investing in PAMM accounts that are under the control of the managing trader, and direct investment, i.e., transferring funds to a trust management account. Each method is different, but they have something in common:

  • 1

    minimum entry threshold;

  • 2

    no restrictions on the choice of a manager/signal provider;

  • 3

    multiple options are available;

  • 4

    the possibility of risks diversification;

  • 5

    projected passive income.

But again, it is worth noting that all these advantages of investing in Forex work only if you have successfully chosen an experienced and reliable broker, and not a fraudster or Forex scammer. To help you in this matter and to protect you from making an error, the Traders Union updates the rating of the best Forex brokers monthly.

PAMM Investing in Forex

This is a popular option for investing in the Forex market, which does not involve direct participation in trading and is aimed at obtaining passive income. The concept of PAMM comes from the English abbreviation PAMM for Percent Allocation Management Module.

Key features of PAMM accounts:

  • A PAMM account is the combined accounts of investors and a managing trader. That is, you choose an account manager that will trade in the international currency market using both his funds and the funds of his clients.

  • There can be many investors, but sometimes managers set limits on the number of participants. The manager can not interact directly with your account or the amount that you want to invest in his order. The bid amount will be automatically withheld in your account.

  • When he bids he will be risking not only the investors’ money but also his own. That is why investing in PAMM on Forex is reliable, the manager is assumed to be more prudent because he is risking his own money, too.

  • The manager is an experienced Forex player with a high percentage of successful transactions. The manager is selected based on statistics provided by the broker. With this option of Forex investing, the choice of manager naturally impacts the success and level of income of your investments.

There are also LAMM accounts. They are less common, but it is worth mentioning them, especially since these two types of accounts differ from one another very little.

The only important difference is that with the LAMM system (Lot Allocation Management Module), the amount of investment is equal to the value of the bid of the managing trader. That is, you risk the same amount as the manager, and you get the same income (less the manager’s commission if the trade was successful).

PAMM accounts are a more common type of investment because they give you the possibility to invest any amount in the manager’s bid, not necessarily equal to his bid. If the amount is less, then the profit is logically less as are the risks. In this case, the percentage of profit for each investor is calculated by the system individually following the value of his investment.

Key features of PAMM accounts

The most modern type of PAMM accounts, which few brokers use today, are RAMM accounts. They operate like regular PAMM accounts, but investors have the opportunity to choose many parameters, for example, acceptable risks and drawdowns, after which funds are automatically withdrawn from the manager’s order.

For all these types of accounts, there are two investment options. You can invest in a specific account or in a portfolio containing multiple accounts. Let’s consider the advantages and features of each method.

PAMM Portfolio Investments

PAMM portfolio accounts differ from a standard PAMM account in that funds are invested in the orders of several managers at once, and not just one manager. The opportunity to invest in a PAMM portfolio is a separate service that is not provided by every broker. Check the broker’s website for details or inquire at the Traders Union support service.

👍 Advantages of PAMM portfolio investing:

  • the main advantages are the same as when investing in a PAMM account;
  • plus the investor is diversifying his investment risks to the maximum.

👎 Disadvantages of PAMM portfolio investing:

  • to allocate the funds across several portfolios, you need a larger deposit than when investing in a single PAMM account.

The main advantage of the PAMM portfolio is that the investor diversifies risks. Therefore, even if one order loses, you can stay in the black because other traders might win. But this is the main disadvantage of such a system, i.e., to successfully reduce risk and level losses, you need to invest in several accounts at once, which requires a more substantial deposit.

Copying Transactions of Successful Traders

This Forex investment option is equally popular with PAMM accounts. An alternative name for the method of transaction copying is auto trading. As in the case of PAMM accounts, everything is simple, but the mechanism itself is substantially different.

Transactions copying method:

  • 1

    you install a special program or use a standard trading platform (it depends on the broker);

  • 2

    the broker offers you signal providers. These are professional traders who are ready to share their orders with you in real-time;

  • 3

    you choose the trader you like and copy his transaction onto your trading terminal, that is you duplicate or “copy” his order;

  • 4

    the signal providers may let you copy their transactions for free or for a commission of the transaction if it wins.

The trader does not act as an investor because all transactions occur within your own account and on your trading terminal. Your money never leaves your control. If you copy a transaction from an experienced and successful trader (statistics are provided by your broker), then the chance of winning is higher than if you would conduct the bid yourself.

Another advantage of auto trading is the opportunity to learn from professionals. Because all the information on the current orders of your signal provider will be available to you. You will be able to calculate his strategy, see how he reacts to certain market changes, and what decisions he makes. This is a unique, invaluable experience that you cannot get by investing in PAMM accounts.

However, the risks are the same; even the most experienced professionals “stumble” sometimes, and losses can follow. But you can diversify the risks with this option by distributing funds among several signal providers. Nothing prevents you from copying several orders at once from several signal providers.

Examples of auto trading services

  • CopyFx.
    This is RoboForex’s auto trading system. It supports the cross-copy function, that is, you can copy orders at once from many signal providers. The work is 100% transparent, and the service works with the typical MetaTrader 4 trading platform. The minimum deposit is $100.

  • Share4you.
    This is an auto copy service that belongs to Forex4you. It provides an extensive list of hundreds of signal providers with detailed statistics. The service has many settings that allow you to copy orders, not 100%, but according to individual parameters. It is fully automated, and an important feature is there is no minimum deposit.

    This service belongs to InstaForex. It also offers a wide selection of signal providers with their ratings and transparent statistics. It is fully automated with the possibility to fine-tune the copy function. The minimum deposit is $10.

Trust Management as an Investing Option

Investing in trust management is the third way to get passive income on Forex. This investment option is a classic but it has evolved to include copying transactions and PAMM accounts.

Investing in trust management is a direct contribution to the trading of another player in the Forex market. That is, you transfer part of your deposit to the specified account, and the trader uses these funds in trading. If the bid wins, the trader transfers the winning amount to you, less his pre-agreed upon commission.

The main risk is obvious. You are entrusting your funds to a third party. And if the contract is not concluded, the trader may simply not return your funds to you or return a lesser amount than promised. There are two ways to prevent this from happening:

Trust Management as an Investing Option

invest in traders who are employees of a brokerage company. Some brokers provide such a service, that is, they have professional traders to whom you can transfer your funds to be managed;

alternative option: work with a third party based on a contract. The contract can be drawn up in different ways, but if you conclude it yourself, without the broker’s help, then all legal defects fall on your shoulders. Theoretically, having a contract is a guarantee of compliance with the terms by both parties. But in practice, much depends on how competently the contract is drawn up.

Alternative option: work with a third party based on a contract

Investing in trust management is riskier than PAMM accounts and auto trading. However, the risk is successfully minimized if you trust the funds to the “personal” traders of your broker. With this option, the situation is substantially similar to investing in PAMM accounts, but in the case of trust management, you transfer funds directly to the account of traders who trade on your behalf.

Top 10 Forex Invest Brokers

We emphasized again that selecting a knowledgeable and reliable broker is the key to successful investment in the Forex market. It is the broker that provides the necessary software and detailed information on signal providers and/or PAMM managers, and he is the one who pays you your profits.

What to look at when choosing an investment broker:

  • availability of the type of program you are interested in;

  • minimum deposit and other investment conditions;

  • which organization regulates the work of the broker.

Additionally, you can (and should!) read feedbacks on the Forex broker you chose. To do this, you can use our website, where Traders Union’s specialists have been collecting feedback for each Forex broker in the market for more than 10 years.

Broker Regulator Minimum deposit Type of Investment program
RoboForex IFSC $10 RAMM, Auto-trading (CopyFX)
Instaforex FSC $1 PAMM-accounts, auto-trading (FOREX COPY)
FxPro CySEC, SCB, FCA, FSCA $1 RAMM (SuperTrader) CySEC, FSCA $250 Strategy Builder, Strategy Template
FIBO Group FSC BVI, SIBA $300 PAMM-accounts, auto-trading
IC Markets AFSL, ASIC, FSA, CySEC $200 MAM/PAMM-accounts
LiteForex MIBC $10 Autotrading (social trading)
FBS IFSC $1 Autotrading (FBS CopyTrade)
XM Broker ASIC, IFSC, CySEC $5 Autotrading (MQL5)

Forex Investing Risks

Forex investing would not be so popular if the risks could not be controlled. Effectively, the risks in the foreign exchange market are no higher than with any other investment option, and sometimes even lower. There are two main risks:

  • You can lose your investment if the PAMM manager or trader you trust to manage your funds turns out to be a scammer. This risk is easily eliminated by working only with trusted licensed brokers;

  • You can lose funds because the manager of the PAMM account, signal provider, or trader to whom you entrusted the management of your funds made an error in his market forecasts. This happens to all traders because it is impossible to win 100% of the time. But to reduce this risk, you can distribute funds between several PAMM accounts or signal providers.

For a novice trader, the chance to win when investing with an experienced player is always higher than when bidding on your own. Plus, as we mentioned already, this is an experience that cannot be obtained in any other way. And if everything is done correctly and all risks are diversified to the maximum, the probability of losing all your funds will be extremely low. However, we recommend investing only the amount that you are willing to lose, and never invest all your funds.

Investing in the Forex Market: Expert Opinion

“Modern Forex investing systems offer the easiest and most convenient way to generate passive income. The main thing is to choose the right broker and investment program. PAMM/MAM/RAMM accounts are now gaining great popularity, but auto trading services are equally promising. All options for investing in the Forex market make it possible to successfully diversify risks using a wide range of mechanisms. As a result, the investor can receive a stable income without becoming a professional trader. However, one should always remember that in financial markets, income always reflects the level of risk. This is one of the main economic laws”.

Antony Robertson, Traders Union’s analyst trader

Author of this Article on Forex Investments

Grant Adlington
Grant Adlington
Independent trader-analyst
  • In 2008, Grant graduated from the London Institute of Banking and Finance, Department of Finance, Investment and Risk;
  • In 2009, he became the youngest trader-analyst of Global Invest;
  • In 2010, he became an independent analyst in TD Ameritrade;
  • In 2011, he defended his Ph.D. thesis on Economics at University of California-Berkeley;
  • From 2012 to 2018, he worked in different American and International brokerages;
  • Since 2018, he has worked with Traders Union as an expert trader as well as with other traders’ associations as a freelancer;
  • He has 12 years of experience in continuous trading on the Forex currency market.

FAQs Regarding the Forex Investing

What does Forex investing mean?

It means that you can invest your money in a PAMM account, copy transactions of successful traders, or use various trust management systems. The common feature for all these methods is that you do not trade on Forex on your own, but professionals do it for you in exchange for a small commission, if successful.

Is Forex investing a reliable system?

The international currency market is a steadily developing system. The reliability of the investment depends on the reliability of your broker and on the success of the PAMM manager or signal provider that you chose.

How can risks be minimized when investing?

At the start, you need to choose the right broker who has a convenient investment program that suits your investment needs. In the future, you can invest not in PAMM portfolios, and in the case of copying transactions, use several signal providers at once.

Which is better, PAMM accounts or copying transactions?

All options for Forex investing can bring good passive income. It is difficult to say which one is better because they conceptually differ in the investment mechanism and each of them can give good results. The investor makes a choice based on personal preferences.