Trading Forex is not for the faint-hearted because it involves dealing with the Forex market in which sometimes you could either incur profit or loss. Most beginners do get worried about navigating their way in the Forex market and this could involve getting your brain worked up to ensure you are able to achieve profit and not incur losses because no one wants to incur losses while trading Forex. Just because Forex appears easy to get into, a lot of traders fail to prepare diligently to face the setbacks that come with trading Forex. Due to the rigorous steps and the continuous trading required to become a professional trader many novices give up on Forex trading because they lack the perseverance needed to handle the Forex market. We will examine carefully different ways to invest and make money in Forex without trading yourself.
Winning in forex trading is always difficult if you do not have a strategy to beat the market. It is said that almost 95% of traders lose in the forex market. However, You can in the battle of forex trading if you are strategies. We have tried to discuss the best 3 ways to make money in the forex even if you have zero or no experience.
Copy-trading can be defined as a form of forex trading where you copy the trading patterns of other professional traders. This way you do not have to worry about having your own trading strategy which is important for you to be able to make profit in Forex trading.
In simpler terms, it means that when a professional trader makes a trade, your account makes that trade as well.It is an added advantage for beginner traders who want to keep learning while earning from the signals of experienced traders.
How does copy trading work?
The way copy trading works is that if the trader you are copying opens or closes a trade, you also do the same. This also applies to if they make profit or losses.
The most important skill you need as a copy trader is how to select a good trader to follow.You need to spend time analyzing the professional trader you want to copy because whether you make profits or incur losses is highly dependent on the professional trader you are copying.
Benefits of Copy Trading
One of the benefits of copy trading is for the experienced traders to help the newbies in Forex trading learn and make profit faster so they can be encouraged to continue with Forex trading. This way, new traders gain adequate knowledge and understanding of the Forex market through the experienced traders.
As the type of trader who goes to work spending about 8 hours at work or more and you are probably fagged out at the end of the day’s work, manual trading can be time consuming because of the processes involved in it such as studying charts, economic calendars, signals, etc. This will take considerable amount of your time. Therefore, copy trading is advisable in this situation as it actually saves time and effort.
ü Diversifying your Portfolio
As a trader who might be interested in diversifying your portfolio, copy trading multiple traders can enable you to be making multiple trades each month and making lots of profit that way. With diversification, you get to spread the risks and you can always make up for the losses incurred with a particular trader, with the profits from other traders.
Copy trading gives you the opportunity to experience the successes and failures of other experienced traders. By doing this, you are learning directly from their errors and experience which can guide you towards a successful trading experience in the long run.
Be a Forex Broker
One of the popular ways of making money without actually trading yourself is by becoming a Forex broker. What does it mean to be a broker? This means that you are a middleman who connects buyers and sellers. A Forex broker is an individual who makes money by contacting buyers and sellers in Forex.
As a Forex broker, you can earn money either when the market is up or down. A lot of people are aware of the massive benefits attached to being a broker and as thus, there is a lot of competition in this role. Unlike in the past when being a broker was much more like an extreme sport due to the difficulties and setbacks involved in it compared to now when there has been technological advancement which makes the role of brokers more convenient.
In the past, brokers usually needed probably pencil, paper and a phone calling big financial institutions and retail traders with opposite ideas and interests to connect while making profits from connecting them. With technological advancement, as a broker, what you will need is a large IT system and enough money. Due to the intense competition between brokers, it is advisable that as a broker you invest more on good marketing and a proper IT structure.
Most people think brokerage fees is the only source of income for brokers but it goes beyond that because you can also go the extra mile of giving proper Forex education and orientation and charge people for such services. A lot of traders also search around for brokers who provide in-depth analysis. You can also look into this to earn more money for yourself.These are ways to earn money as a Forex brokers apart from the popular ways,
As a broker, the only thing you need is volatility.Market volatility has to do with the measure of how drastically a market’s prices changes. This simply means an unexpected event that will move the markets up and down. As a broker, you don’t care about the direction the market moves in a volatile period, you only care about if the move is large enough. The more volatile a market is the wealthier a broker is.
v Forex Managed Accounts
Are you worried about not having time to trade or scared of the rigorous process that Forex trading comes with?Setting up a Forex Managed Account might just be the right solution for you. It involves investing money in a Forex account and having professionals trade on your behalf. This gives you the opportunity to invest in Forex through the management of an experienced trader as well as making use of the expertise of an experienced Forex trader.
Reasons to invest in a Forex Managed Account
ü Opening a managed account with a reputable broker gives you transparency and high level of security as regards your funds.
ü For beginner traders who are not confident in their trading prowess, managed accounts let you earn huge profit over a short period of time.
ü Skilled money managers can help to improve your trading skills through advice and guidance.
ü Forex managed account are also important to those who would like to trade but do not have enough time go through the trading processes.
What you should look for in Forex Managed Account
ü Consider the risk level of an account or money manager. This means that you have to choose a money manager whose track records in managing forex accounts is within the risk level you are comfortable with.
ü Fees, expenses and minimum deposits involved with a trading account are worth looking out for in managed accounts. Some brokerages might charge an account management fee in addition to the performance fees firms managing your account might charge.
ü Examine the past history of managed forex accounts because the history would speak a lot about the experience of the Forex account.
Detailed Steps to opening a Forex Managed Account
Ø Determine your risk tolerance as this will help guide you in selecting your preferred money manager.’
Ø Conduct a proper research to find the best possible brokerage.
Ø After finding the right broker for you, it is also important to check out their terms of condition/contract to know if it is suitable for you. You need to look into such things as fees and expenses, drawdowns and liability coverage.
Ø Check out the performance history, client reviews and testimonials to ensure you are selecting the right trader.
Ø You will need to complete and sign necessary paperwork which includes the signing of a Limited Power of Attorney Agreement (LPOA).
Ø Receive your account number and transfer funds into the account. This account number is tied to your name and segregated trading account.
Ø You will need to wait for the money to be transferred and then the steps are complete. It is quite an easy process and you could have a managed Forex account set up without difficulties within a couple of days.
· Pooled Accounts
Pooled accounts are portfolio management options that are designed for investors who would like to invest in the financial market and would prefer to put their money in the care of a firm in a bid to eliminate financial investment risk. Pooled account is similar to the way mutual funds work. In Mutual funds, many investors pool their money together in a separate account and share the profits after fees and expenses. Fees and expenses usually vary between traders in a pooled account. A proper background check is important before deciding which pool suits your needs. You need to examine how different funds have performed over the past years.
The minimum deposit amount for pooled account is usually lower compared to individual accounts because many people invest into the same pool. It is also important to look out for pool scams because there are quite a number of scammers out there who promise you a high percentage of return on investment in Forex. They offer you a guaranteed high percentage of return on investment and of course nothing is guaranteed in trading Forex, If it seems too good to be true it definitely is not true.
Individual account is a standard type of account when discussing a managed account. Individual account is a segregated account where a money manager performs all trades on your behalf based on your instruction or preference since he is trading for you alone. They base their decisions on your risk level and specific strategies you give to them.
This type of account also requires quite a high amount for the minimum deposit since there are no funds being shared from other traders unlike pooled accounts. It is highly recommended that while trying to select a competent money manager you examine reviews and do a thorough research before selecting your money manager.
The Pamm accounts make use of sophisticated technology to distribute profits, losses and fees based on percentages of funds each investor has contributed to the master account used in trading.It is a type of pooled account that makes use of the percentage allocation money management. Pamm accounts allows for one professional to handle the trading accounts of various traders. Based on the amount a trader deposits, each trader account has a PAMM ratio which is why the risk is distributed between the portfolios of all traders involved. PAMM managers’ charges you based on the percentage-based fee agreed in the LPOA agreement. PAMM accounts allow you to deal directly with your preferred broker in a transparent manner.
For traders who would like to be involved in the process they have access to monitor the trading activities of the PAMM manager in real-time. For a better understanding of how PAMM accounts work we would give an example below:
In this example, a single manager works with three individual traders and charges them a 10% fee for services rendered. The total pool contains investments with a total of $20,000. Which is distributed between the four parties involved as follows:
§ The account manager pours 40% into the fund which is about $8,000.
§ Investor A accounts for 20% of the pool’s value which is about $4,000.
§ Investor B has invested 30% of the funds which is about $6,000.
§ Investor C has invested 10% into the fund or $2,000.
Let’s assume that after one month, the account manager boosts the pool’s initial capital to $28,000 which is equivalent to a 40% increase. The manager would then apply their 10% fee on the net earnings, i.e. $800. The remaining earnings of $7,200will be distributed between all four parties in this manner:
§ The trader/account managers collects $7,200 * 40% = $2,880 in net profit
§ Investor A receives $7,200 * 20% = $1,440 in net profit
§ Investor B receives $7,200 * 30% = $2,160 in net profit
§ Investor C receives $7,200 * 10%= $720 in net profit
Because the manager also contributed some capital to the pool, it keeps them at bay to ensure that they do not fiddle with the investor’s money. It makes them work so hard to ensure that they make profit even though losses are inevitable and if a loss is incurred the manager would not charge their 10%. In a situation where the 10% loss of the account’s capital occurs during the following month, the $28,000 pool would have to drop by $2,800 and it becomes $25,200 which in turn affects individual investment of each pool because there would be a decrease by 10%.
Participants in a PAMM account
- Forex broker/brokerage firm
- Trader/Money manager
A lot of investors in the Forex markets would like to invest in Forex while concentrating on other investments that they have and would still like to ensure that their investment does not go down the drain which is why different ways or methods to make money from forex without actually trading yourself was discovered. For some investors it is not because they lack the time to monitor their investment but because they do not have proper knowledge about Forex and would not want to waste their money which is why they seek out help of professional traders to help them manage their Forex account.
As you have learned so far, there are various means to make money from Forex without actually trading yourself. We have been able to discuss broadly each of these factors. There are several other ways to make money without actually trading yourself that might not have been discussed here, but, you can be rest assured that we have covered the best ways to make money in Forex without trading yourself and with the proper analysis given for each of these ways it should not be difficult in going for a process of your choice that might suit your need or convenience.