why forex!! 3 Great & Safe Passive Forex Trading
As briefly explained in my previous article of Top 8 rumours about Forex
and What is Forex? Basic knowledge about the Forex you need to know
and What is Forex? Basic knowledge about the Forex you need to know
1)
You have "Want To Learn" needs. Trading Forex will automatically make
you pay much more attention to global politics, economies and general
money market, which will obviously take your financial literacy into the next level.
I know what you want to say next, correct, I am not asking you to trade
by yourself, however believe me that once you put your own money into
FX market, your attention to the said subjects will increase rapidly,
therehore your knowledge will improve dramtically, consequently you may
expand your friends & networks automatically.
2) You need something that has little correlation with popular financial assets such
as Stock or Bond which people usually have in their portfolio (Stock
and Bond has little or negative correlation each other, means when stock
goes south bond is not necessary to go south or even go north, that's
why combination of stock and nond is good), and Forex is said to be
little / no correlation to both Stock & Bond, thus it's pefect for
risk aversion, simply "Don't put all your eggs in one basket" as a
fundamental notion of Portfolio Diversification.
3) You require huge liquidity
that is a factor you often fail to take into account in critical times
such as marriage or university funding for a dependent, and retirement
etc. The liquidity refers to the accessibility of your asset, which can
be measured as the time to arrive into your pocketbook if you happen to
need it today. It usually relates to the size & participants in the
market. See the below chart which makes you realize how big the FX
market is, means liquidity is probably the best in all financial
products.
Source: babypips.com
Now, let's have a look at FX market a bit further;
Forex Market
Forex
- foreign exchange market (Forex, FX, or currency market) is a global,
worldwide over-the-counter financial market for trading currencies.
Structure wise, it is a decentralized inter-bank market and main
participants are central banks, commercial & investment banks, hedge
funds, and corporations & private speculators. The foreign exchange
market determines the relative values of different currencies and the
spot market accounts for over one-third of daily turnover. As seen in
the above chart, Forex is one of the largest financial markets in the
world with over $5.0 trillion average daily turnover, that is over 12
times the average daily turnover of global equity markets. FX market
used to be traded only among banks & institutional traders. But due
to the development of user friendly trading platform and proliferation
of on-line FX brokers who offer the trading environments for individual
traders, number of individual traders have constantly been increasing.
However, given the nature of Zero-Sum Game (remember because of the nature, it is Recession Proof Sector,
means whatever & however the total economy changes, it doesn't
affect this market), for every winner there should be a loser. It t is
said that only 5% of the traders make a consistent profit, experts win,
while inexperienced novices always lose. Having said, the best way to
make money in FX market is using the professionals' expertise, which
will also allow you to make this opportunity Passive.
On top of the 3 reasons I listed before, tere are many benefits of FX trading such as;
- Low transaction cost
However, you also consider fundamental risks of;
- On-line Scams / Enemy Broker etc.
I
will issue exclusive article to discuss Enemy Broker and allow me to
remind you of the On-Line Scams here as a Basic Safety before moving
into 3 FX passive methods.
As said in my previous article ,
it’s widely believed that over 97% of on-line programmes offering
high-yield returns in pooled fund structure are scams. They disguise and
tantalize you with easy profit which you should never consider as a
good income opportunity. Therefore it's better to stay away from any
schemes you leave your money to other people' entire control and focus
on the schemes allowing you to make your money 100% under your own
control.
3 Great & Safe Passive Forex Trading
3 Safety Schemes to make FX Trading Passive Income are;
- Managed Account / PAMM (Percentage Allocation Management Module)
- Social Network Copy Trading
- Automated Trading by Forex Robot such as EA (Expert Advisor)
, which can provide you Extra Income conveniently by Passive FX Trading.
I'll explain a bit one by one.
GEM - Global Extra Money / Joshua Walker
Forex Managed Account - PAMM
Forex
Managed Account is the form of alternative investment a money manager
trades the foreign exchange market on a client's behalf for a fee.
Managed Trading Account contains a portfolio of securities that is owned
by an individual investor means you yourself directly own, but are
chosen and traded by a hired professional money manager on your behalf
(100% Passive) - trading can be managed by human namely discretionary
trading, or automated technique such as using robot that can eliminate
all emotion. In Managed account, any of your money never leaves from
your hand but all are kept in your brokerage account under your own
name. You grant permission to the experienced traders to access to your
account so as to trade on your behalf.
Keep
it mind that the permissions you grant are limited to trading only and
he cannot deposit any extra fund to the account or withdraw from your
account which is usually specified in the LPOA (Limited Power Of Attorney)
contract you sign (see the right image as an example of FinFX), so let
me stress that you are the proprietor of the account (Ponzi Free).
Generally speaking, for minimum investment, most brokers will need at
least $100k and more to agree to work only for you., which is a big
entry barrier for normal investor, then the new technology called PAMM
will help you.
PAMM Account
PAMM
- Percentage Allocation Management Module is a new technological
solution allowing the trader on one trading platform to manage
simultaneously unlimited quantity of managed accounts. Depending on the
size of the deposit each managed account has its own ratio in PAMM.
There are few other software featuring the same function as PAMM, such
as LAMM & MAM, see the brief description of all 3 popular software
as;
- PAMM (Percentage Allocation Management
Module) distributes gains, losses and fees on an equal percentage basis.
In this way all accounts regardless of size obtain the same percentage
returns.
- LAMM (Lot Allocation Management Module)
allows the trader to allocate different trade lots to each investor's
account. This grants the trader the flexibility to use different
leverages for different types of investors.
- MAM
(Multi-Account Manager) is a combination of the features found in a PAMM
and LAMM, and offers more flexibility to the trader managing investor
accounts.
Trader's activity results (trades, profit
and loss) are allocated between managed accounts according to the
ratio. To elaborate on how it works, your account is just electronically
connected to the trader’s master account by the above software, means
that every time a trade is taken you get a duplicated order
electronically into your account. The traders cannot steal your money,
as it is firewalled by the brokerage house to prevent this from ever
happening. The bottom-line is that the PAAM allows small investors to
enjoy the security & return of managed account, theoretically the
system can accept from a cent, and in fact some PAMM trader permits the
investment from $1. Note that the investors should open their accounts
in the same brokerage where the trader manages to use PAMM, means
usually you can’t choose your own broker by asking the trader to use it
for managing your account. Anyhow, under PAMM, you don't need to learn
how to trade forex or any forex trading strategies, but need to select
the best money manager who trade forex for you.
Social Network Copy Trading
Social trading is another way to utilize the expert’s knowledge & skill in trading FOREX.
It
builds on the notion that the collective wisdom of thousands of traders
is better than the wisdom of one. By connecting traders from all over
the world into a network and sharing their views and trades real-time,
investors can use that information to make social rather than
fundamental or technical trading decisions. You as an ordinary trader
can either use this “social” information to make your own decisions and
trades (i.e. self-trade) or decide to automatically follow and copy one or more traders (i.e. auto-trade), and the latter is what we focus as 100% passive trading. In order to make it workable, we need a common platform called social trading network.
It is the glue that connects all the traders and trade followers,
similar to Facebook or Twitter. You can view & analyze the
performance of real live traders and you can also automatically copy the
trades in your account from the traders you decide to follow. In fact,
the social trading networks companies that provide the platform
initially focussed on the idea-sharing between traders by creating a
profile including trading strategies & performances to connect
like-minded traders all over the world, which made the network provide
the real-time trading feeds from the traders. Because the networks
shares a transparent actual performance, it motivates social trading
companies to allow investors to automatically follow the trades from
traders they believe to be profitable. So, it is in a sense trading
signal sent automatically from selected professional trader, which are
automatically
copied and execute the exactly same trading in your account. In Forex
trading, it’s said that only around 5% trader constantly makes money,
and the beauty here is the above networks allow you to search such
successful traders and copy their trades.
Copy or Mirror Trading
Mirror
trading refers to a relatively sophisticated system & trading style
where you automatically copy trades executed by a variety of
auto-trading and signal services, which generally suits large volume
traders. Copy trading is similar
to mirror trading and enables you to directly copy a trade or a trader
you want to follow, which is virtually an alternative to mirror trading
and a better suited to small scale / novice traders. In copy trading you
can select individual traders to copy, whether by copying their
individual trades or by copying their entire trading strategy.
Therefore, you can assign a percentage of your account balance to follow
a specific trader or several traders concurrently. As long as you are
copying a trader, every trade which they open will be replicated by a
copy trade in your account. Generally speaking, the copy trading is said
to be a simpler and more flexible way to trade socially. Again, you
don't need to participate in any forex trading courses / study
complicated fores strategies, but just need to choose the top trader in
the social trading communities.
The
advantage of the copy trading in comparison to the managed account /
PAMM is a cost. While you need to pay certain % (usually against the net
prfit) to the trader who manage your account in managed account, you
basically don't pay anything to the trader in the copy trading because
they are compensated by the social trading companies that provide the
platform. Visit Passive Income Page to find the 2 most popular & established Social Trading Networks.
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