BEWARE OF THE (managed) PAMM ACCOUNTS WITH HOTFOREX!!! They are presented in such a way as to mislead potential investors into believing that their performance is much better than it really is.
There is a massive loophole whereby PAMM account managers can in fact lose large percentages of their accounts under management, but still have the appearance of trading well, AND being paid handsome sums for it! It's because of how HOTFOREX is set up. The loophole is this:
Hotforex only graphs closed trades in their performance view of each fund manager, and stipulates that PAMM account managers get rewarded according to a high water system based only on CLOSED trades. So what happens? So many of the 'best' fund managers with Hotforex are actually losing heaps of money, except that they never close all those bad trades - they just let them drift indefinitely, knowing that it is absolutely not in their interest as a fund manager to close them.
Imagine this: You're a PAMM account manager. You go ahead and blithely place heaps of trades each day without even thinking about their probability of success - you know that later you can close the ones that happen to be profitable for a profit, and just leave all the negative ones to hang indefinitely. You'll be rewarded a fund managers' fee (usually 30%) each month for all the 'money you've made', even though the equity on your accounts has fallen substantially, month over month, ever since you started trading there! Great system, yes? NOT FOR INVESTORS IT ISN'T A GREAT SYSTEM!
You can go to Hotforex and see all the upward sloping graphs you like. Take the example of their NUMBER ONE RATED PAMM ACCOUNT MANAGER, CO-INVEST:
Forex Brokers |
According to the data at the left hand side, there has been $7,853 deposited into the account (taking into account the small withdrawal) and yet, the equity of the account is currently only at $6,122. And just look at that upward sloping performance graph!!! Outlining a whopping "465% time-weighted return gain". RUBBISH!!! The graph is meaningless, misleading, and designed to fool unfortunate investors like myself into believing that the fund manager is much better than they really are.
The thing is, the fund manager here, CO-INVEST, is still reaping a monthly reward - 30% of all the 'profits' he or she is making. All the while actually LOSING THE MONEY OF THE ACCOUNT HOLDERS through their trading.
THIS IS JUST PLAIN WRONG, AND WHILE PERHAPS NOT TECHNICALLY FRAUDULENT, IT'S MISLEADING IN THE EXTREME.
As soon as I placed my money with this fund money, the equity (actual value) of my account went down to some 77% of its original value - I had BOUGHT INTO the bad open trades on the account and was hence sharing in these losses, from the second I came into the PAMM account. And since then, the account equity has continued to fall! Even while the account 'balance', with its pretty graph and lovely figures (based only the closed, positive trades' has risen by about 35%!!
What a SCAM!!!
Stay away from HOTFOREX in general. I have been reading about their bonus systems, as some people have raised an issue with this - well, I didn't go in for this area of their business as it didn't make sense to me. But rest assured, THIS BROKER IS OUT TO GET YOU IN MORE WAYS THAN ONE. YOU HAVE BEEN WARNED!
