MAM allocation is a powerful technical tool in Forex affiliate marketing. Using the right allocation method can help IBs, hybrid partners, and CPAs, get higher returns, lower risk, and draw in investors with a lot of money.

This article will give you a clear, useful playbook on how to allocate MAM: proportional allocation, equity allocation, and risk-based allocation (allocation by equal risk).

You’ll see examples, pro tips, and implementation steps so you can launch a robust managed-account product with MetaTrader 4/5 brokers.

How to Set Up Your MAM Allocation Engine

Getting the infrastructure right is very important. You need to plan out the structure of your managed accounts business before you can decide which MAM allocation methods to use. This includes:

• – Working with a broker whose MT4/MT5 service supports more than one way to allocate (lot allocation, percentage allocation, proportional by balance, proportional by equity, risk-based methods)
• – Making sure that subaccounts can have their own settings, such as minimum balance, leverage, margin rules, and custom ratio multipliers
• – Making legal, regulatory, and LPOA (limited power of attorney) agreements
• – Dividing investor profiles into groups based on their capital, risk tolerance, and return expectations
• – Making dashboards and reporting tools so that subaccount holders can see their balance, equity, drawdown, and P&L

You can add proportional, equity, or risk-based allocation strategies on top of this foundation to meet the needs of different types of investors.

The Simple Baseline for Proportional Allocation

Proportional allocation, which is often linked to balance, is the easiest way to start your managed account offering.

In this model, each subaccount gets a share of each trade that is equal to its share of the master account’s balance. People often call it “proportional by balance” or just “proportional allocation.”

In real life, this is how it works:

Formula for calculation:

The size of a subaccount trade is equal to the size of the master trade times the balance of the subaccount divided by the balance of the master account.

For example:

• – The master opens 2.50 lots.
• – The master’s balance is $150,000.
• – For Subaccount A, $15,000 gets 2.50 × (15,000 / 150,000) = 0.25 lots.
• – Subaccount B gets 2.50 × (60,000 / 150,000) = 1.00 lot, which is $60,000.

Why it’s helpful:

• – No extra setup needed
• – Clients can easily understand the split
• – Matches exposure to capital size

Limitations:

• – Doesn’t react to equity drawdowns
• – Bigger accounts take on more risk
• – Risk exposure is out of whack when drawdowns happen

Many copy and MAM systems also have a proportional to balance × ratio option. This lets you overweight or underweight certain accounts (by multiplying the base proportion by a custom factor).

Set proportional allocation as the default “entry level” for new customers. It is clear, fair, and easy to understand.

Dynamic, Drawdown-Aware Exposure for Equity Allocation

When your clients’ accounts go up and down in value, proportional by balance can cause exposures to be off. That’s where equity allocation comes into play.

This method uses the current equity to decide how much to give out, not the original deposit or static balance. This means that if a client loses money, the size of their future trades will automatically get smaller.

How it works and what it means:

The size of the subaccount trade is equal to the size of the master trade multiplied by the equity of the subaccount divided by the equity of the master.

Example to show:

• – The master does 1.80 lots
• – The master’s equity is $120,000
• – The equity in Subaccount C is $10,000, so it gets 1.80 × (10,000 / 120,000) = 0.15 lots.
• – Subaccount D equity = $30,000, so it gets 1.80 × (30,000 / 120,000) = 0.45 lots.

This method automatically changes risk exposure when client equity goes up or down.

When to choose equity allocation:

• – When you want fairness in exposure, especially for smaller accounts
• – When you have clients with different drawdowns
• – When you have strategies that are very volatile

Important things to remember:

• – Needs to be recalculated more often
• – May be affected by slight rounding or minimum lot limits
• – Some brokers call this “proportional by equity” or “equity percent allocation”

Equity allocation is a natural next step when you have more clients and want to keep the risk levels in your subaccounts from getting too far apart.

Allocation by Equal Risk (Risk-Based Allocation)

Risk-based allocation is your best way to stand out for advanced clients or premium tiers. When you allocate by equal risk, you make sure that each client risks the same amount of money or percentage on each trade, (no matter how much equity or balance they have.)

This method makes sure that drawdowns are in line and that no account loses too much.

In a normal allocation by equal risk process, these are the steps:

1. – Set a risk percentage for each account, like 1% of equity.
2. – For every master trade (with a known stop loss in pips), figure out how much money you could lose per standard lot.
3. – Find out for each subaccount:
4. – The risk amount is equal to the equity times the risk percentage.
5. – The maximum lot size is equal to the risk amount divided by the SL in pips times the pip value.
6. – Give that many lots to that subaccount, no matter what its share is of the master account.

Small example:

• – The master trade SL is 40 pips.
• – The pip value is $10 per standard lot.
• – The equity in Subaccount E is $25,000, and the risk is 1%, which means the risk is $250.
• – The equity in Subaccount F is $5,000, and the risk is 1%, which means the risk is $50.

So:

• – E gets 250 ÷ (40 × 10) = 0.625 lots
• – F gets 50 ÷ (40 × 10) = 0.125 lots

This method is very good at balancing out volatility. It also keeps smaller accounts from being too exposed. A lot of brokers let you set a minimum margin % threshold. This means that no more allocation will happen if the margin is too low.

Good points:

• – Fairness at the market level
• – Risk is the same across all accounts
• – Clients are more likely to stay with you during drawdowns

Problems:

• – More complicated algorithms
• – Need to handle rounding of fractional lots and minimum/maximum thresholds
• – When equity gets very low, it may need to switch or fall back dynamically.

If you put clients into a “premium” tier, offer risk-based allocation as the best option. Clients will pay more for that protection.

More Ways to Allocate and Terms

Below are some other ways that brokers often help with allocation. Use them as extras or to target specific groups.

• – Lot Allocation / Fixed Lot Allocation: Each subaccount sets a fixed lot amount that won’t change with balance or equity. Good for clients who pay a flat rate or subscribe.

• – Percentage Allocation (Static Percentage Allocation) – Give each account a set percentage (like 5% or 20%) of the master trade, no matter how much money is in the account or how much equity it has.

• – Equity Percent Allocation: A percent of equity (for example, 20% of equity) is used to determine subaccount trades, and the total of these trades is equal to the master’s trade volume.

• – Ratio Multiplier (Balance × Ratio / Equity × Ratio) – Change the base proportional formulas by multiplying them by a ratio to make some accounts heavier or lighter.

• – Ways to Divide Profit and Loss (P/L) – There are no open trades in subaccounts in real time. When the master trade closes, the P/L is sent to the subaccounts through deposits or withdrawals. You can choose between percentage by P/L or proportional by P/L.

Use this spectrum to make tiered plans, such as Bronze = fixed lot, Silver = proportional, Gold = equity, and Platinum = risk-based + ratio customization.

Which Allocation Method Works Best for Your Strategy: PAMM or MAM?

The PAMM (Percent Allocation Management Module) and MAM allocation models look the same on the outside. However, they are different in terms of how flexible and controllable they are.

PAMM usually puts money from many investors into a master account. After that, trades are divided up into simple percentage shares.

MAM, on the other hand, keeps separate client accounts. It lets you choose from a number of advanced allocation modes, such as lot allocation, equity allocation, allocation by equal risk, and more.

MAM gives you the tools you need to meet the needs of all types of clients, whether they are small, medium, or institutional.

Pitch MAM allocation as your advantage: clients keep their own accounts, see trades clearly, and pick the method of allocation that works best for them.

To-Do’s Checklist and Tips for IBs, affiliates, and CPAs

Before launch:

• Choose brokers who fully support proportional allocation, equity allocation, risk-based allocation, and fallback P/L methods.
• Set clear rules for fees, withdrawals, performance, and the law
• Group investors by their capital bracket, risk tolerance, and growth goals

Starting up and matching:

• – Offer packages with different levels:
  • Entry: fixed lot or static percentage
  • Standard: proportional allocation
  • Enhanced: equity allocation
  • Elite: risk-based allocation or allocation by equal risk

• – Let clients try out allocation with calculators or a short demo
• – Teach clients about lot allocation, percentage allocation, and allocation by equal risk so they understand how useful it is.

Management that keeps going:

• – Keep an eye on drawdowns and rebalance every so often. As accounts grow, move them to allocation methods that work better for them. Use min/max lot rules to limit extreme exposures.
• – Keep an eye on performance metrics like Sharpe, max drawdown, and volatility for each subaccount.

Making money and growing:

• – Charge higher performance fees for risk-based tiers
• – Offer “custom ratio multiplier” or “hybrid allocation” packages as upsells
• – Use case studies to show how switching from proportional to equity cut relative drawdown by 15%

• – Use marketing language:
  • “Flexible MAM allocation lets you adjust risk”
  • “Choose allocation by equal risk for protection at the institution level”

Conclusion

Master MAM allocation by using proportional allocation as your starting point. Add equity allocation to make things fair when there are drawdowns.

Besides that, set aside risk-based allocation or allocation by equal risk for premium clients who want equal exposure.

These allocation strategies, with tiered packages, customization, and clear reporting, enable running a profitable managed account business that can grow.

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