LAMM stands for “Lot Allocation Management Module”, and is a managed forex account type which provides a system where individual investors delegate their funds to a designated trader or money manager. This professional trader then engages in forex trading on behalf of these investors.
The trading outcomes achieved by the manager in a LAMM account are distributed to the investors’ forex accounts, in a manner that is directly proportional to their individual financial contributions. As a form of remuneration for their expertise and efforts, these managers usually gain a portion of the profits, primarily through a performance-based fee arrangement.
How do LAMM accounts work?
In LAMM accounts investors specify how many lots they want to allocate to the manager’s trades. This allocation can be a fixed size or a multiple of the lots traded by the manager.
This means that when the fund manager executes trades, the same trade will be mirrored into the investor account proportionally to the allocated lots.
When using a LAMM account, the investor starts by choosing a money manager based on their trading strategy, historical performance, and other relevant criteria. The investor then decides how much money to allocate to this manager, essentially lending them capital to trade on their behalf.
In contrast to MAM accounts, which offer a broader range of customization options, LAMM accounts only provide the flexibility to adjust lot sizes, a key feature for managing market exposure. Although this customization option might seem limited, it can be quite dynamic, with the frequency of adjustments largely dependent on the specific policies of the trading platform or the stipulations set by the money manager.
What determines the investor’s trade size in a LAMM account?
In a LAMM account, the investor’s trading size is quantified in lots, which are the standard units for measuring trade volume in forex trading. One lot typically represents 100,000 units of a given currency, which means that 1 lot of USD would be equivalent to 100,000 USD.
The crucial task for an investor in a LAMM system is to decide the number of lots they wish to allocate for the money manager to handle.
For instance, if a money manager initiates a trade with a volume of 1 lot and the investor has opted to allocate 0.1 lots (also known as 1 mini lot) to this money manager, the size of the investor’s position will be 10% of the manager’s trade.
Consequently, any profits or losses from this trade will also be scaled down to 10% of the original trade’s outcome.
Can investors set allocation preferences in a LAMM account?
Investors in LAMM accounts can influence the investment strategy by selecting the number of lots they wish to allocate to each money manager. This lot selection is the primary tool for investors to influence their portfolio in LAMM accounts.
However, LAMM accounts do not provide options for further involvement in trade decision-making.
This goes in contrast with other managed forex accounts like MAM accounts, which offer a variety of allocation methods. In fact, the fundamental characteristic of LAMM accounts, as indicated by their name (Lot Allocation Management Module), is their focus on managing investments through the allocation of lots, and nothing more.
How frequently can investors make changes to their LAMM account?
In LAMM accounts, the investors can adjust their investment settings usually at the start of each trading cycle.
Compared to other types of managed accounts, like PAMM, LAMM accounts typically offer greater flexibility for investors to modify their investment parameters.
However, the specific frequency and flexibility of making these changes are largely dependent on the terms and conditions established by the LAMM account manager.
What is an example of LAMM account investment?
Imagine an investor, Alex, decides to invest $1000 in a forex trading LAMM account managed by a professional trader, Jordan.
Alex decides to allocate 0.5 lots for every lot traded by Jordan. This means that for every trade Jordan makes, Alex’s trade will be half the size of Jordan’s in terms of lot allocation. If Jordan trades 2 lots in a particular currency pair, Alex’s corresponding trade will be for 1 lot.
Let’s say Jordan enters a trade, buying EUR/USD with 2 lots. In Alex’s account, this trade is automatically replicated with a 1 lot size, adhering to his 0.5 lot allocation setting. If this trade results in a profit, Alex gains a proportional amount, albeit half of what Jordan gains because of the smaller lot size. Conversely, if the trade incurs a loss, Alex’s loss is also proportionally smaller.
Over time, the value of Alex’s $1000 investment will fluctuate based on the performance of Jordan’s trades and Alex’s chosen allocation. This example demonstrates how LAMM accounts allow investors to leverage the expertise of professional traders while maintaining control over their risk exposure through lot size customization.
How does LAMM compare to other managed accounts?
Here below you can see a table comparing all the different managed forex accounts.
| LAMM | PAMM | MAM | RAMM | |
|---|---|---|---|---|
| Factors | Based on fixed lots | Proportional to client’s percentage share | Multiple allocation methods | Based on a predetermined risk level |
| Allocation Method | Uniform risk distribution | Uniform risk distribution | Customizable per account | Uniform risk distribution |
| Type of risk | Low | Moderate | High | High |
| Flexibility | Best LAMM brokers | Best PAMM brokers | Best MAM brokers | Best RAMM brokers |
What are the advantages of LAMM accounts?
The advantages of LAMM accounts are listed below.
- Limited Market Knowledge Friendly: LAMM accounts are a type of managed account, meaning that it allows investors to participate in trading without needing extensive knowledge about the market.
- Commission Earning Opportunity: Professionals managing the funds can earn commissions from the trades they make.
- Lot Allocation: LAMM accounts allow the parties involved to select the appropriate lot sizing for each strategy
What are the disadvantages of LAMM accounts?
The disadvantages of LAMM accounts are listed below.
- Limited Investor Control: Investors have minimal influence over their fund’s investment decisions, making it less suitable for those who prefer hands-on management.
- Higher Fee Structure in LAMM Accounts: Investors with a LAMM account will be charged performance fees on top of other fees (such as deposit and withdrawal ones).
Are LAMM accounts safe?
LAMM accounts are often perceived as secure options, however, traders should always be aware of the risks inherent in forex trading, where the potential for financial loss is a constant.
Research reveals that between 74% and 89% of retail investor accounts experience losses, emphasizing the continuous risk present in the forex market.
Enhancing the security of LAMM accounts are several regulatory and safeguarding actions taken by brokers and financial regulatory bodies. These initiatives are focused on supervising the conduct of LAMM managers, contributing to the overall safety of these accounts.
What are the best LAMM account brokers?
Several well-regulated brokers excel at providing LAMM services and demonstrate superior performance across evaluation criteria, such as regulatory oversight, strategy transparency, execution quality, and cost structure.
- IC Markets stands as a leading choice for LAMM accounts through its ASIC regulation in Australia and CySEC authorization in the European Union under license number 362/18. The broker delivers Raw Spread accounts with spreads starting from 0.0 pips and averaging 0.1 pips on EURUSD, combined with commission charges of $3.50 per lot per side. IC Markets requires a minimum deposit of $200 and operates servers located in the Equinix NY4 data center in New York for optimal execution speeds. The broker provides specialized software for multiple account management variations and maintains segregated client funds with tier-1 banks across various jurisdictions.
- RoboForex operates under Financial Services Commission regulation in Belize and maintains membership with The Financial Commission, offering compensation coverage up to EUR 20,000 per case. The broker sets minimum investment requirements starting from $100 for LAMM participation and provides access to over 12,000 trading instruments across multiple asset classes. RoboForex displays extensive trader performance data and charges a 25% fee on profitable trades for its managed account services. The platform supports diverse funding methods and offers negative balance protection alongside comprehensive risk management tools for strategy followers.
- FXOpen operates as a member of The Financial Commission and offers hybrid PAMM/LAMM functionality through its ECN accounts requiring minimum deposits of $100 and STP accounts starting at $10. The broker ensures fee transparency through its advanced PAMM service analytics that enable real-time performance monitoring and automated profit distribution systems. FXOpen provides access to over 600 markets with leverage up to 1:1000 and maintains direct market access through relationships with major liquidity providers including Deutsche Bank AG, JP Morgan, and UBS. The platform builds community reputation through competitive trading championships and maintains robust regulatory compliance across multiple jurisdictions.
The enumerated brokers unite through their commitment to regulatory compliance, transparent fee structures, and advanced technology infrastructure, while differentiating themselves through minimum deposit requirements, commission models, and geographic focus. Traders seeking optimal LAMM forex brokers should evaluate these offerings against personal capital requirements, preferred trading instruments, and desired level of manager oversight to identify the most suitable platform for their investment objectives.
Do all Forex brokers offer LAMM accounts?
Not all forex brokers provide LAMM accounts.
However, it’s worth noting that many of the world’s top forex brokers do offer managed account solutions to their customers, and these frequently include LAMM accounts.
In some cases, brokers offer a hybrid solution that combines features of MAM and LAMM accounts. This mixed MAM-LAMM solution provides greater flexibility, allowing traders and fund managers to choose an approach that best suits their trading style, needs, and preferences.