What is MAM?

What is MAM?

The acronym MAM is software that allows a trader to execute trades in multiple trading accounts through a master account.

It is a tool widely used by Capital Managers or Money Managers to place orders quickly and smoothly on the accounts of their customers.

Benefits of an MAM Account

Assigning block orders:

  • MAM accounts allow you to place orders of various volumes very quickly in the accounts associated with the master account.

  • You can place orders quickly.

  • You have control over the volume to be placed.

Simple operation management:

  • You can assign the operation values of each order you make.

  • Depending on the broker you may have a limited or unlimited number of associated accounts.

How do MAM accounts work?

Accounts managed by an MAM account are segregated and independent accounts of each other but are managed or operated by a professional trader or Money Manager.

Customers have control over their money and can keep track of transactions that are performed on their account, the Manager or Money Manager only has the permissions to operate the account.

All this is detailed in the LPOA (Limited Power of Attorney) that both the client and the Money Manager must sign. The LPOA also establishes the payment that the Money Manager will receive for its management services (usually it is usually a % of the profitability it generates).

There are a variety of ways to allocate earnings to accounts managed by the master account (MAM). These include:

  • Lots Assignment.

  • Percentage allocation.

  • Proportional to balance.

  • Proportional to equity.

  • Percentage allocation of equity.

  • Among many others.

How you allocate earnings to managed accounts also depends on the broker you choose to work with. There are some brokers who will only allow you to allocate earnings to managed accounts based on balance or equity while others give you more options.

Sample MAM Account

In this example you will be a Money Manager with 3 clients: Rubén who has a US $ 10,000 account, Susana with a US $ 20,000 account and Ernesto with a US $ 30,000 account.

The commission you will receive is 20% of the profitability you generate.

Between the accounts of your 3 clients you add a capital of US $ 60,000. Imagine that you decide to carry out an operation in the market and you get to win $ 6,000.

How will you distribute that profit? First, you will receive 20% of the profitability generated. That is, 20% of the US $ 6,000 which gives us US $ 1,200.

The remaining money (US $ 4,800) will be distributed in proportion to the size of each client’s account, so the distribution of earnings will be as follows:

    Ruben will win $ 800. Your account will now have $ 10,800.

    Susana will win $ 1,600. Your account will now have $ 21,600.

    Ernesto will win $ 2,400. Your account will now have $ 32,400.

This is how an MAM account works in a general way. In this example we have seen how the profits are distributed on the basis of the capital that each of the clients contributes, nevertheless, as we mentioned previously; There are many other ways to allocate profits to our customers.