By allocating investments among various financial instruments, markets, and industries, diversification helps minimize risk. A balanced or diversified investment portfolio might include stocks, bonds, commodities, and other assets. Depending on the account, the investor might handle some of all of the trades on his own, or hire a money manager to do it for him. In this article, we will discuss two of the most versatile trading tools for each option.

What is an MAMM?

Used mostly in currency trading (forex), a multi-account management module (MAMM) is an integrated software tool that lets traders manage several accounts at once. Instead of making trades from each individual account, the manger simply uses a master account, which has access to the cumulative balance of all subaccounts. Allocations among subaccounts are weighted based on the current balance of the subaccount as a percentage of the cumulative master account.

What are the advantages? For the experienced forex trader, multiple accounts means that they can borrow more money to profit from the daily fluctuations in exchange rates. And since the leverage that is possible in the forex markets is one of the highest investors can obtain, a small trade could return beaucoup bucks. Of course, it could also lose them a fortune in no time!

Another obvious advantage of MAMM accounts is that they save time. Instead of managing each account individually, the seasoned trader can make daily trades from the master account and the software will automatically make balance adjustments for each subaccount.

What is a PAMM?

Almost identical to a MAMM, a percentage allocation management module (PAMM) is an integrated software tool that lets forex traders manage other investors money in multiple accounts. Like PAMM, this extension tool was designed for use with MetaTrader 4, the worlds most popular electronic trading platform. Unlike PAMM, it is not designed for use by day traders or individual investors, as it is only licensed to forex brokers. The traders these brokers employ then use PAMM software to manage multiple accounts at the same time.

What are the main advantages? Because investing in the currency market is quite risky for the individual investor, many have professional forex trades do it for them. When using PAMMs, the client can take heart in the fact that the trader is often investing some of his own money in each of the trades he makes.

What are expert advisors?

Both PAMMs and MAMMs for the MetaTrader platform give administrators the option of applying expert advisors. A flexible, often helpful piece of software, the expert advisor feature tells users which trades to make, and can even be programmed to automatically execute trades on live accounts. The features comes in handy in the forex market, since it operates around the clock and every human trader needs to sleep. Essentially, the automated software detects trends based on certain parameters and will buy and sell based on the traders input and preferences. This feature is particularly helpful to money managers that have dozens, even hundreds of accounts to look after.

For the individual investor who is managing several accounts with an MAMM, expert advisors can make a world of difference. First and most importantly, the automated expert advisor takes decision-making out of the equation, which makes trading less stressful. Not to mention the fact that the advisor can complete trades even when the trader is absent or asleep. As such, these programs are often a godsend for inexperienced forex traders who are learning as they go.

About the Author. FX Perpetual is a leading managed account provider aiming to outperform 80% of the worlds best performing hedge funds. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could lose some or all of your investment and therefore you should not risk more than you are prepared to lose. Before deciding to invest in a Managed Account you should carefully consider your investment objectives, level of experience and risk appetite. You should be aware of and fully understand the risks associated with trading forex on margin and seek independent professional financial advice if necessary.