How Forex trading makes or loses money

Many people who take up forex trading think the only way to make money from this market is buying and selling currency pairs. That is not how it is: there are many other ways of making money around forex that you can look into. If, after a long time trading forex, you suddenly realize that you are not good at trading and not really good at money management or technical analysis either, then you can look into a few ways of making money around forex, such as selling EAs (robots that trade by themselves), coding indicators to customers’ orders, or working as an IB.

Do not know what forex is yet? Find out now:

• What forex is
• A guide for people just starting out
• How to check a forex broker before you open an account

And if you can survive in the market, then besides trading you can also look into a few other ways of making money around forex, such as selling signals, trading for funds, teaching or writing books. Most of these ways require you to have real trading experience already; they are not for people just starting out. If you feel you are strong in one particular area you can make use of that area, or you can work in several different fields at the same time, whichever you choose.

Trading forex with your own money

Everyone knows this one, and every trader new to the profession has to put up their own money to trade. Making money from forex, and above all through trading, really is not simple at all. Most people starting out lose money, quite a few blow up their accounts, and even people with a lot of experience go through stretches of heavy losses. After a long time in the field some people have to leave the game, and only a few are still there. If you are in that second group, congratulations. And if you feel trading is not really right for you but you do not want to give the field up, look into a few of the lines of work below, which may still let you make money around forex.

Making money from forex through funds or by raising capital

As said above, if you are in the group still surviving in the market after a long time, you may start thinking about taking other people’s capital to trade on their behalf. This needs saying clearly: in Vietnam, taking other people’s money to trade forex through a foreign broker, that is running managed accounts, is not recognized or protected by law, and a number of forex managed-account cases have been dealt with by the police. When the money is lost, the person who put it in has almost no way of getting it back, and the person who took it on can be held responsible before the law. Licensed investment funds recruit traders through a process of their own; they do not take on managed accounts from individuals.

But money is by nature a sensitive and awkward thing, so if you are not careful it is very easy to spoil relationships, especially if you raise capital from your own friends and family. Beyond that, you also need to watch your money management when you make money this way. Because the money you trade is not yours, you often will not feel the loss so keenly, and it is very easy to overreach. And you know already that blowing up an account can happen at any moment. So think it over carefully before you choose this route.

Selling trading signals

This is one of the common ways, because besides platforms that let a trader sell signals, such as Mql5, eToro.com and Zulutrade.com, you can sell signals through Telegram channels of your own. Wherever you sell, though, you have to be able to prove what you can do.

Selling signals through well-known websites around the world

With websites or platforms such as Mql5, eToro.com or Zulutrade.com, first you need to open an account, usually with at least a few hundred dollars, and trade for a few months so that there is a history to be counted. All through your trading, the platform keeps a table of statistics for your account: your rate of profit, your level of risk, your ratio of winning to losing trades, the number of trades in a week and so on, to judge what you can do and to rank you. Of course the higher the rank, the more trustworthy what you can do, and from there more traders will buy and sell the signals you provide.

Selling signals through Telegram channels

Besides the way above, many people set up a Telegram channel to sell signals. Be careful with this model on both sides: a great many channels only show off the winning “calls”, cannot prove their results with a real account, and then lead their members over to a paid group, a managed-account group or an unlicensed broker. If you provide signals, publish a trading history verified by a third party (Myfxbook, for instance) and state the risks clearly; if you are a follower, do not believe a win rate that the channel announces itself.

PAMM or RAMM accounts

A PAMM account is a model in which investors put money into a shared account traded by a manager, and the profit and loss are divided in proportion to the capital each one put in. RAMM and copy trading services work differently: the manager’s trades are copied automatically into each follower’s own account, from the entry point through to the take profit and the stop loss.

With this arrangement, the manager is given a share of the profit from the accounts of the people following. Only a few managers keep a good result going over the long run. And for the person putting the capital in, PAMM or RAMM is in substance handing money to someone else to trade through a foreign broker, with all the legal risk set out above.

Note: when you are a PAMM or RAMM manager, the broker usually requires you to put a share of your own capital into the account (the minimum depends on the broker). So take part in this arrangement only when you really do trust what you can do and already have a trading history that can be checked. Because if the trading loses money, you not only drag the traders following you into losing money, you lose money yourself as well.

Making money from forex by selling robots that trade by themselves (EAs)

A robot, or EA, is a program that automatically produces trading signals or places buy and sell orders according to what has been programmed into it. The advantage of this method is that the trader does not have to sit at the machine all day; the robot does it all for you. Beyond that, an EA is a machine that has been programmed, so it is never affected by trading psychology, and it can cut a loss or take a profit automatically, exactly to plan. Even so, an EA that runs well on past data will not necessarily make money in the future, and a great many “high-return robots” put up for sale are frauds in substance. If you build an EA to sell, state its limits and its risks clearly. If you know about computing you can learn how to program and create robots to sell to customers all over the world over the internet.

Coding indicators to a customer’s order

Besides creating robots as we said above, you can also make money around forex by writing indicators to customers’ orders. Of course, to do that, besides being good at programming you also have to know technical analysis, so that you understand how each kind of indicator is used. The work is fairly interesting and depends mostly on what the customer asks for, much as it does when you code software.

At the start, if you have not found customers yet, you can code indicators yourself and then sell them directly in the Mql5 system or in the MT4 trading platform.

Making money from forex by becoming an introducing broker (IB) for a broker

For someone working as an IB, the direct financial risk is lower than trading yourself, but there are two things to know: foreign forex brokers are not licensed in Vietnam, so introducing clients to those brokers has no legal basis inside the country either, and an IB has a responsibility to state the risks clearly to the people they introduce, because the commission is worked out on those people’s own trading volume. Being an IB for a broker is a matter of introducing customers to register and take part in trading at a forex broker. An IB’s commission is worked out on each lot the customer trades. The more the customer trades, the larger the commission, which is why being an IB has become an attractive line of work for a great many traders today.

To become an IB you only need to fill in the IB registration form, send it to the broker, and you will receive a referral link or ID. Whenever a customer opens an account through that link or ID and then goes on to trade, you receive commission. If you have plenty of contacts, or you are a successful trader, or you run Telegram groups or signal services with a large number of members, you can have an income from commission; but pushing other people to trade a great deal in order to raise your commission is a plain conflict of interest.

Teaching and selling ebooks

This last way is for any trader with a bit of a gift for writing. You do not have to be someone who has been very successful, but your experiences in the trader’s profession can help you make money from it too. Besides selling ebooks you can also open classes to teach traders. Forex is growing and becoming better known all the time, so the demand for learning is rising all the time as well. If you feel you have enough experience and can put things across well enough for students to understand and take in, then you can think about making money around forex in this field. When you teach, be honest about your own trading results and do not promise your students a profit.

The above are the ways you can make money around forex without necessarily only trading. Of course, as you can see, to work in these fields you still have to have the background knowledge to do with forex. So build up as much knowledge as you can, and put it together to use for the purpose you want.