LAMM Brokers & Accounts
LAMM (Lot Allocation Management Module) brokers offer a managed account service where traders can automatically copy the positions of a money manager in return for a fee. This guide will explain how to get started with LAMM trading, including the pros and cons. We also list the top LAMM brokers and accounts in 2024.
Brokers With LAMM Accounts for United States
How LAMM Trading Works
Traders connect their accounts to a central terminal controlled by a money manager. The money manager then makes trades in line with their investing strategy, for example, shorting stocks and shares. This means if the money manager makes a profit, the traders does too. However, on the downside, losses are also mirrored. Importantly, traders keep control over how much capital they wish to invest.
Other types of managed accounts, such as PAMM (Percentage Allocation Management Module) and MAM (Multi-Account Manager), are similar to LAMM trading in that they both involve following the strategies of other investors. However, with PAMM, traders are allocated a proportion of any profits and losses depending on how much they invested. In contrast, MAM is a mixture of LAMM and PAMM where traders have more control over leverage and lot size but percentage allocation is still used.
LAMM trading solutions are particularly useful for investors with limited experience or time. And while users don’t have full control over their trading strategy, clients can disconnect from a particular money manager if they aren’t satisfied with the results. Traders can also diversify across multiple money managers to spread risk.
LAMM Brokers Explained
LAMM brokers essentially connect prospective clients with established money managers. They then facilitate the copying of transactions between the money manager and the trader. Importantly, the trader’s account and the money manager’s account are kept separate for security reasons. This means the money manager cannot make withdrawals from the trader’s account, and vice versa.
The top brokers show the performance statistics and trading history of money managers. This helps traders identify the best money managers who are most likely to make a profit. Of course, most money managers will have days when they incur losses but by looking at trading history over an extended period, investors can identify options that make consistent returns in the long run.
Brokers may also allow the money manager to choose the amount they charge and the nature of the fee, for example, a percentage of any profits and/or a flat fee. As with all forms of trading, opting for a low-cost provider will help maximize margins.
Top LAMM Brokers
Although PAMM and MAM are generally offered by more brokers, brands such as Grand Capital and Forex Optimum provide reliable LAMM trading services. Grand Capital, in particular, offers access to forex, stocks and indices in their LAMM solution, giving traders exposure to a good range of financial markets.
Getting Started LAMM Trading
1. Find a Broker
Not all online brokers offer managed accounts and even fewer provide a LAMM trading service. With that said, the best LAMM accounts offer a transparent pricing schedule, a user-friendly interface and terminal, plus reliable customer support. It’s also worth considering whether they have mobile functionality in case you want to monitor progress on the go, along with push notifications. Finally, check the minimum deposit required to get started. Some LAMM brokers accept clients with a $10 initial deposit while other brands are aimed at high-volume traders with a $10,000+ minimum deposit requirement.
2. Choose a Market
Although traders rely heavily on the strategies implemented by their money manager, clients should still have some knowledge of the market that their funds are being invested in, for example, US tech stocks or minor currency pairs. Find a market that you are relatively familiar with so you can better predict how upcoming events may influence the outcome of your money manager’s strategy.
3. Choose a Money Manager
This is a key consideration. Fortunately, most brokers provide detailed trading histories of potential money managers, alongside profit and loss metrics. The best brands also rank money managers and assign a risk rating so you can find an option that aligns with your appetite. Finally, it’s worth comparing the commission charged by each provider to ensure you’re getting a good deal.
4. Connect Your Account
Once you have chosen a provider, the last step is to connect your trading account to the money manager’s account. You will also need to decide how many lots you wish to invest and whether you want to diversify across multiple money managers. Of course, funds will need to be deposited before trades can be copied.
Note, a replication ratio of 1:5 would mean that the trader invests five times the amount that the money manager does and, therefore, will receive five times the profit (or loss).
Pros of LAMM Accounts
- Experienced traders – LAMM brokers help traders utilize the skills of experienced investors, which can generate passive income
- Segregated accounts – The money manager’s account and the trader’s account are segregated and one cannot withdraw funds from the other. This helps bring an additional layer of security to LAMM trading
- Money manager’s funds – The money manager uses some of their own funds when trading, which means they are more likely to be responsible and measured in their investment decisions
Cons of LAMM Accounts
- Commission – Any profits made by the trader will usually be reduced by the commission that has to be paid to the money manager
- Limited brokers – Most brokers do not provide a LAMM trading service so investors may find they have a limited choice
- Less control – Traders who enjoy having full control over their investment strategies should not engage in LAMM trading. Although you can choose your money manager, traders forfeit a significant degree of decision-making autonomy
Bottom Line on LAMM Brokers
LAMM trading appeals to many investors, including beginners and those with less time to research and monitor the markets. It can also prove an effective way to generate passive income. On the downside, if your money manager makes a loss, you will too. Minimum deposit requirements and commissions can also erode profits. Overall though, if you want a hands-off approach to online investing, LAMM brokers are a good option.
FAQ
What Markets Can I Copy Trades In With LAMM Brokers?
What Are The Pros Of LAMM Accounts?
LAMM trading means clients can make use of experienced investors with successful trading strategies. It also means traders do not have to invest as much time in managing their portfolios.
How Do You Know If A Money Manager Is Good?
Brokers will often display the money manager’s trading history so that prospective investors can view their profit and loss over a set period. The best LAMM brokers also apply a risk rating and offer insights into the strategies used, for example, scalping, shorting or high-frequency trading. Note, more successful money managers tend to charge higher commissions.
Why Would A Money Manager Share Their Strategy?
The main reason why money managers share their strategy is to generate additional income. Profitable positions that are copied will incur a fee, which is automatically sent to the money manager by the intermediary broker.
Can A Money Manager Withdraw Funds From A Trader’s Account?
No – the money manager’s account and the trader’s account are segregated so funds cannot be withdrawn. Only the online broker has access to both accounts and they should act as an impartial middleman.