When you’re a successful trader, people you know may ask you to trade forex for them, multiplying the extra capital they have lying around in their account. While it may be a real headache dealing with other people, especially when it comes to money, there might be legal limitations, too. So, can you trade forex for someone else?
You can trade forex for someone else. It can be a casual partnership that doesn’t need any certifications or a professional service for which you may have to be certified with the SEC or FINRA. Go through all the risks of forex trading with your friends before accepting to trade for them.
Throughout this article, we’ll discuss the pros and cons of trading forex for other people. We’ll also suggest some tips to consider before agreeing to trade for others.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
Trading Forex for Others
You could trade forex for other people, but depending on the business’s type and scope, you may have to meet different requirements. For example, will it be friendly cooperation where you help your friends and relatives earn some extra cash by trading? Or will you be working for strangers as a professional trader?
Let’s say you decide to trade forex with your friend or family’s money. That would be a friendly form of business that probably doesn’t need to fulfill any legal requirements. You could take their money, invest in forex, and report their earnings or losses regularly.
Alternatively, you could ask them to open a forex account and give you access to the trading terminal. This way, they can control the account and see how the trading goes if they want to.
This method is the most casual way of trading forex for other people, but it comes with some risks and complications. For example, if you lose their money, they may hold you accountable for this loss, and you’ll face legal problems.
That’s why you need to have a legal license depending on your country. Plus, if you want to trade for others more professionally, you should follow the rules and regulations. Some countries can be heavily regulated, and trading for others may be illegal in some.
In the US, if you want to work as an investor money manager, you need to have FINRA certification and register with the SEC. These licenses ensure your work is legal, and you can hedge your potential losses if you work with large amounts of capital.
However, depending on the country or even the state you live in, you might have to follow different legal requirements. For example, the number of people you work with or the length of time you work can determine if you need legal permission and certifications. So, it’s better to consult a lawyer before agreeing to trade for others.
Even if you don’t need to get a specific certification, make sure to sign a power of attorney contract with your friend. It’ll give you full control over the account and protect you from legal consequences.
Advantages of Trading Forex for Other People
If you’re a successful trader, your family and friends may reach out to you, asking to protect their capital by investing it in forex. It could have advantages both for you and them.
You make more money
In addition to making money on trading, you can charge your friends additional fees for the time you spend on their accounts. Plus, you can get a cut from their profits, say 20%. That’s an extra source of income that you can have after subtracting taxes.
You have more capital
You can grow your capital and engage in better-yielding investments. With higher capital and margin, you can use more leverage and increase your potential profits. It’s a win-win deal for both of you.
You help your friends and family
By trading for your family and friends, you help in two ways. First, they can earn more money and protect their capital. Second, they receive regular profits while they don’t need to engage in the complexities of trading and bear the emotional burden. So, it works for them as a passive income.
You learn more
You shouldn’t accept to trade for others if you’re not already a successful trader. However, trading for others helps you broaden your knowledge. You can never be too cool to stop learning. So, the more you trade, the more experienced you get.
Disadvantages of Trading Forex for Other People
Trading for other people may have so many downsides that can even discourage you from going through with it. So, make sure you consider all before making the final decision.
High Risks of Losing Money
Forex trading comes with many unforeseeable risks. So, no matter how big a profit you have made, you may not be able to repeat it for a long time. You may end up blowing all your friend’s money. If your friends or family don’t know how forex trading works, they could form unrealistic expectations that might destroy your relationships if they don’t come true.
Depending on your relationship, they may not believe what you tell them about your profits or losses. They may even sue you for losing their money.
Complicated Regulations
You may have to get a specific license or register with a regulatory body to avoid future problems. You need to go through complicated paperwork and bureaucracies. Plus, you should consider taxes, such as income tax and business tax, making things more difficult.
Too Much Time and Energy
Unless you make excellent profits, it may not be worth your time to trade for others. You could spend the same time and energy working on your account and earning more money yourself. However, if you want to help your friends and don’t care about your profits, it may be completely okay to work for free or miss the opportunity to work for yourself.
Too Much of a Burden
No matter how clearly you talk about the potential risks, trading for others may put a huge emotional burden on you.
You have to worry about another person’s money on top of all the stress and uncertainty that comes with forex trading. It may not be worth it, considering what you get in return. These emotional burdens may even prevent wiser decisions or taking bold risks.
Important Tips When Trading Forex for Someone Else
If you finally decide to trade for others, keep the following tips in mind:
- Don’t do it unless you have enough skills and have been successful for a meaningful period. Make sure to crash and burn your own money before promising to make gains for your friends. Even if people you work for invest their “beer money,” it could be painful to lose it.
- Be clear with them about all the risks involved in forex trading. Don’t promise any profits since you can’t predict how the market will go, and tell them frankly it’s probable to lose all their capital.
- If you trade for strangers, don’t forget to consult a lawyer to learn all the risks and areas you’ll be accountable for. The last thing you want is to end up with debts and a legal case for breaking laws.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
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Conclusion
You could trade forex for other people in two ways: open a forex account for them and trade using that account, or use their money to trade on your own account. Either way, you have to tell them about the potential risks and the probability of losing their capital.
You should know that the complexities of trading for other people could cost you your relationships. So, think twice before agreeing to do that.
Plus, talk to a lawyer before starting to trade for others to make sure you’re not breaking any laws.
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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