Trust management is the process of transferring funds into the hands of another trader or following his strategies, based on the analysis of trading results. Systems of following "other people's" strategies have become widespread in the XXI century, mainly as a product of additional services Forex - brokers.
The demand for trust management, the automation of the terms of mutual settlements and trade statistics made it possible to extend this service to binary options. Therefore, the types of accounts in brokers that provide such services completely coincide with the Forex market:
- the company guarantees the transfer of profits, but is not responsible for losses; a binary options trader independently chooses a manager or signals based on the results of trading;
- the service is available on a separate account, where the trader transfers the amount of investment chosen by him.
Types of trust management accounts for binary options trading
1. PAMM accounts - the trader transfers funds based on the requests of the minimum investment threshold from the trustee, agreeing to a pre-agreed percentage of remuneration from profit. The conditions also specify the "hold" period during which the principal's investment is held.
After the hold period, the investor has the right to withdraw any part of the previously sent amount, including making a full withdrawal. If a profit occurs, the manager withdraws a pre-agreed percentage, but does not compensate for the loss and is not responsible for "draining" the deposit.
The broker guarantees the depositor the safety of funds (the manager cannot withdraw them), automatically executes transfer orders and provides trading statistics for all PAMM accounts. The company charges an additional commission for each investment.
2. LAMM-binary options. By opening a special account and transferring a certain amount of funds to it, stipulated by the minimum investment threshold on the part of the broker, the trader chooses a trustee.
Unlike the first case, when the funds are in the hands of a trading trader, LAMM accounts copy transactions without transferring investments. The trader independently sets up the part of the deposit for which binary options will be automatically opened, identical to the position of the manager.
The broker independently determines the cost of the service and pays the trader, the signal donor, a subscription fee. An investor can connect several options for copying other people's strategies to a LAMM account by selecting them from the trading statistics provided by the company.
3. MOM-binary options. A special feature of this type of trust management account is the mandatory consensus of transactions of the managing trader by the investor. Despite the fact that the investor transfers the deposit to a special account that blocks the possibility of withdrawing them for the management period, he has the right to cancel any transaction.
Otherwise, the algorithm for selecting an account based on trading statistics, the pre-agreed percentage of profit, the possibility of full or partial withdrawal after hold coincide with the type of PAMM account.
4. Social trading. Traders who do not want to transfer funds to special accounts, based on the minimum investment thresholds, and pay a premium percentage determined by managers who do not guarantee income, choose the "budget option" of auto-following the strategies of traders who have opened access to their transactions and trading statistics for a subscription, fixed fee.
The subscription is valid for a month, the trader independently chooses the size of the investment and the type of following transactions (automatic or notification) and the number of signals. The broker, for its part, makes it possible to automatically configure the opening of mirror orders.
Civil law aspects of private trust management in binary options trading
Trust management under contracts concluded between individuals (including individual entrepreneurs) is null and void in the legal field of the civil code. There are enough offers and licensed mechanisms for regulating investment in any type of financial instruments, including binary options, on the exchange market. The reliability of investments is determined by the availability of a license, the status of the body that issued the document, the reputation and history of the broker's activities.