Building a passive income stream can be so liberating. To know that even if you were to quit your job today, you will still have regular cash flowing in, allowing you to pick jobs that make you happy.
There are a number of different ways to make a passive income stream happen. The most popular business ideas include real estate, and investments in stocks, and mutual funds. If you have sizable assets, you could also consider hiring a wealth manager to handle these assets for you.
In a good year, such investments can bring you returns of anywhere between 8% to 15% pre-tax.
However, it is always good to diversify your passive income sources so that when one stream fails, you can always rely on other streams to make up for it.
Why is Forex trading popular?
In recent years, Forex trading has become an increasingly popular investment channel. Although we call it ‘Forex’, this is sometimes used to refer to a much broader class of investments called ‘CFD’ (Contract for Difference).
In simple words, when you buy CFDs, you are not actually owning anything. Instead, you are buying a notional product that increases in value when the price of the actual product increases. And it falls when it falls. So, if the price of Gold increases, you can buy a CFD for Gold that increases in value as well.
If that is the case, why not buy Gold directly? The answer to this lies in what is called ‘leverage’.
Let’s say you want to invest $5000 in Gold. When you buy real Gold, you get $5000 worth of the metal. So when the price increases by 10%, the price of what you own now becomes $5500. You sell it and make $500 of pure profit. Amazing.
But with CFD, you get what is called leverage. That is, when you put $5000, there is a third-party that puts in more money from their side. This is significantly higher than what you put in.
For example, if you go with a broker that offers 1:30 leverage, it means that when you put $5000, the other party puts in $150,000.
Now, when you buy the CFD for Gold, you are actually buying $155000 worth of ‘contracts’.
What happens if the price rises 10%? That’s $15,500 profit. And you can technically walk away with so much profit (minus the interest you pay this third party for them having lent you the money).
Now, do you see why Forex trading, or CFD trading in general so exciting and popular?
But what’s the catch here?
Sure enough, there is a catch, and a big one at that. In the above case, the price increases 10% and you are ecstatic.
What happens when the price drops 10%?
When you own real gold, your $5000 investment now becomes $4500. You lose $500. That’s bad, but it’s not the end of the world. You move on.
But with CFDs, you could end up blowing up your entire savings. Your $5000 investment now has a loss of -$15,500 (plus all the interest you pay the third party for having lent you the money).
Wait, how is that even possible? It absolutely is possible because of what is called margin. But you don’t have to go into that right now.
The bottom line is CFDs are incredibly risky and that is why everyone (including me) have these huge disclaimers running at the bottom of their pages.
You should only invest money that you can afford to lose.
Does that mean you should stay away from Forex trading
Yes, and No.
Let me explain. If you have never traded before, and you do not know the A-B-Cs of trading, you should absolutely not trade CFDs.
However, it is also a fact that there are thousands of people making insane profits trading these products everyday. They are able to grow their wealths much faster than you.
Perhaps there is a way for you to take advantage of this?
This is where ‘trading signals’ come into play
What’s a trading signal
Think of it this way – say, you have a job interview at NASA and you know absolutely nothing about rocket science. Would it help if someone were to whisper the answers in your ear?
Well, you may not be able to launch a rocket after all, but this hack is good enough to clear the interview, right?
Trading signals are exactly the same when it comes to Forex trading.
You may not know anything about Forex trading. But what you can do is know what to trade and when to trade them through signal providers.
These are professional Forex traders who trade with their own real money. But instead of only them benefitting through this, they also pass on this information (called ‘signals’) to others who wish to trade.
In return for this service, they charge a percentage of the profits you make through this investment.
We at Rafrador are signal providers too!
Our team spends several months building each of the different trading signals we have today. Our trades are based on several volume and momentum based analysis that tells us when prices are going to increase and when they decrease.
Our trading signals come with their own set of ‘risk management’ processes. This means that even when trades do not go our way, we have our ways that help mitigate any major losses. This way, even when things go terribly wrong, we do not lose more than 7.5% of our asset.
In other words, if you invest $2000 with Rafrador, the maximum loss that can happen is $150.
On average, our Forex trading system sees a return of around 0.15% to 0.25% every day. That’s around 60% returns annually. But do know that none of this is guaranteed. Forex trading is a risky business and I already told you so.
How to start trading Forex passively – step by step guide
Here is a step by step guide on how to trade Forex passively.
Step 1: Sign up with a Forex broker. Do not be greedy and pick someone with huge leverage. It’s very risky. I would suggest someone with medium risk like 1:30 leverage.
Step 2: Go to Zulutrade, WeCopyTrade, or KlipC and look for ‘Rafrador’.
Step 3: Choose Copytrade. This way, when we place a trade, you trade too, and when we close the trading position, you close too.
Quick note: All Forex brokers have what are called ‘Demo Accounts’. If you are feeling increasingly nervous about putting real money in, start with a demo account. This way you can see your fictitious money grow through the copy trading process. When you are convinced, you can put your real money.
Do you have questions about how this works? We are very active on Twitter. Come say hi and ask your questions here: @rafrador.