(disclosure: i am a pamm manager at hotforex)
there are a few things you can watch for when investing in a pamm:
if you are allowed to filter the ranking table like the hotforex v2 pamm, you can use it to your advantage.
1. choose duration more than 1 year or min 6 mths.
2. then returns more than zero. ie must be profitable.
3. draw down less than 25 or 20 or anything you are comfortable. if you choose dd with say 5%, then you will have very few choices left, just go for slightly higher number. will explain how to filter manually once you filter the pamm table.
4. after criteria 1-3 normally you won't be left with many choices because very very few pamm will survive past a year. if you want to be more confident choose a longer duration say two years.
after you are left with say 15 - 20 pamms, you can then go through each one (sounds like some work but trust me it is worthwhile as this is your hard earned funds n u need to protect it) and check for floating p/l (profit or loss)... usually they are losses, so the thing you need to check is how big the losses are?
this is critical... few ppl know how to look into this and compare with the dd number captured in the draw down column!
if the floating p/l is say -100 and the equity (not balance) is 300 then u know that the real dd is 33%. compare this to the max dd number captured in the website usually at the top or left column of the page.
just by using the filter mentioned earlier n also manual comparison i assure you that you are likely (no guarantees in fx world) to not lose your whole capital. if you have slightly more knowledge on fx trading you can then drill down to the returns n dd level you are comfortable with. if not, it is still better than blindly invest in pamm based on the returns alone as most retail traders just look at. they go for highest roi!
one of the reasons i emphasise duration of the pamm is because the manager is likely to be very careful with your funds given he or she survives so long and after building a long track record there is even a better reason to preserve the account and trade with lots of discipline.
you may asked how i know about all these? i have traded fx for a long time on a full time basis and i am also managing a pamm in hotforex in fact one of the longest one in the pamm table. not here to advertised but should you be interested take a look at the link below. we can discuss further should it capture your interest. http://www.donnaforex.com/index.php?topic=12110.0
using what i just said above n with the condition below at hotforex pamm v2:
days opened > 360
gain > 1 (u can change this number)
abs gain > 1 again
max dd < 25% (u can adjust this to your liking, i use the default value)
only ten pamms came out. now i can still down to each one to see they are with investing. at least they stand the test of time. if course for those who want very high returns in a short period this way of filtering is not suitable. it is for ppl who want long term n consistent gain with piece of mind without having to worry a blown account when they wake up in the morning! :)
hope this help!
take care n safe trading!
p/s: please also check the last trade to make sure this pamm is still being actively traded n managed not just a "zombie pamm" with good record from a long time ago but not traded actively anymore.