In the last few years, many have seen the appeal of passive income, and we’ve seen many enter the world of forex. With India’s increasing involvement in global financial markets, knowing how to trade forex in India has become important for people looking to diversify their income streams. The ability to earn passive income from trading forex is something that can entice traders from across the country. This blog will go over the strategies that are available to traders who want to create passive income streams in the forex market, including how TFX works to make this more efficient.
Understanding Passive Income in Forex Trading
Passive income is an income earned by investments or activities that require little or no difficulty to maintain. When it comes to forex trading, passive income means developing a strategy that allows you to earn money while using the least amount of effort to manage your trades. Given that the forex markets are operational around the clock and have the added benefit of a global reach in terms of trading hours, the forex market uniquely offers ways to capitalise on passive income opportunities.
It is legal to trade forex in India, and there are various methods of generating passive income while trading forex without staring at the market for hours. In this guide, we will discuss the most productive means of earning passive income in forex trading, which in turn allows you to continue earning income without physically working for it.
Key Strategies to Earn Passive Income with Forex Trading
- Copy Trading
Copy trading enables traders to replicate trades from seasoned or successful traders automatically. This approach is especially useful for novice traders who don’t have the time or experience to analyse the market. The advantage of copy trading is that you learn from others’ skills and trades, and make passive income while they trade on your behalf.
If you select the trader with a reliable track record, you can mimic their trades and earn a profit without having to execute the trades yourself. It is an easy way to be involved in forex trades without being involved in the actual trade.
- Automated Trading Systems (Expert Advisors)
Automated trading systems (and the often similar term, Expert Advisors or simply EAs) trade for you and are programmed to follow set criteria. EAs, like their human counterparts, can follow specific strategies of their choosing – trend-following, range trading, etc. Moreover, they can trade regardless of you or the human factor; they can operate 24/7 as long as the market is open, backed up by your account broker, and always hit the buy “enter” or sell “exit” button efficiently.
EAs offer a passive income opportunity for traders because, instead of watching the market, they can stay busy while an EA trades for them. When automated G is being used, traders do not have to stare at the charts to generate great income. They can comfortably take a couple a trades here or there with the EA helping them out even while they are on that beach holiday in Tahiti!
- Managed Forex Accounts
Managed forex account investing is where professional traders are responsible for everything forex-related. This means they make your trade decisions for you, as well as manage your risk. This is for you if you want forex exposure, but you’re not interested in managing the trades yourself or don’t have the knowledge or time to manage them actively.
Managed accounts earn you passive income for no active participation. Managed accounts charge fees, but it is considered a great alternative if you want to benefit from working with a professional trader.
- Long-Term Holding Strategies (Carry Trading)
A carry trade is a long-term strategy that involves borrowing money in a currency associated with a lower interest rate and then using the funds to buy a currency associated with a higher interest rate. As long as the interest rate differential between the two currencies provides a profit margin and the trader has a stable market to trade while holding that position over a longer duration, the trader will get paid interest over time. Traders using this approach are more suited to long-term positions instead of continuously needing to look for the exit when they are able to receive the benefits of a carry trade instead of looking for actual price point profit.
The carry trade approach requires a special kind of patience that you may find difficult, especially if you are in a no man’s market seeking a long move. It can lead to a good stream of passive income for you once you set yourself up for a very low volatility environment with little to no exchange fluctuations.
How to Trade Forex in India
Indian traders have access to the worldwide forex market through licensed forex brokers. There are a few easy steps that will get you trading forex in India in the right way.
- Select a Regulated Broker: Make sure that the forex broker you select operates within global industry standards, has a secure platform, and operates transparently with traders. TFX provides traders with access to various trading tools and features for trading, while still being safe and relatively simple to use.
- Open a Trading Account: After selecting the broker, open an account by completing the KYC process and funding your account.
- Select Currency Pairs: Indian traders can only trade currency pairs that include the Indian rupee (INR), i.e. USD/INR, EUR/INR, GBP/INR.
- Start Trading: When your account is set up and funded, you can begin trading forex either manually or using one of the passive income methods discussed above.
Risk Management and Due Diligence
While there is an opportunity for passive income through forex trading, it is necessary to be cautious while participating in the market. Forex markets can be volatile, and if there is no appropriate risk management strategy involved, traders could incur great losses.
Here are some possible risk management strategies to consider:
- Diversification: Don’t put all your funds in one currency pair or strategy. Diversification is a way to reduce risk and ensure that you do not lose everything if a trade goes wrong.
- Stop-Loss Orders: A stop-loss order closes your position automatically if the market turns against you, allowing your loss to be limited to your chosen stop-loss price.
- Awareness of leverage: Leverage is offered by Forex brokers and can multiply both gains and losses. It is important to be cautious with leverage and make sure you understand the effects of using leverage before using it.
How TFX Supports Passive Income Generation
Ultimately, services like TFX are paramount to executing these passive income strategies correctly. TFX supports each of the strategies discussed as follows:
- Copy Trading: TFX’s easy-to-use copy trading feature makes it easy for users to find expert traders and copy their strategies. Simply put, TFX reveals a clear and transparent method for users to gain from the knowledge of others.
- Automated Trading Systems: TFX encourages automated trading systems and gives traders the ability to automate their strategies. Traders can produce passive income without having to babysit the market.
- Managed Forex Accounts: TFX doesn’t offer managed accounts, but it provides the tools and education for traders to make informed decisions and follow professional traders or signals.
- Holding strategies (Carry Trading): TFX offers broader access to a range of currency pairs, making carry trading more user-friendly. TFX has the market data and immediate reporting.
With the right mindset and risk management factors in place, forex trading can develop into a good way of passive income for those looking to add to their financial portfolio. By utilising the features and support available on platforms like TFX, you can take advantage of this opportunity and grow and build a consistent income over time.
