There are probably some difficult ways of making a cloak, but it can definitely be easy too - otherwise I wouldn't bother with it myself!
Mine are generally made from green stuff indeed, and on the model itself as it gives the cloak support (unhardened green stuff doesn't stay in much shape by itself) and, well, it's the most logical way to give it the right size and shape right?
I start of with a mixed piece that I then flatten. Best surface to work on is something flat and wet; smooth plastic works well. I then cut rectangular or trapezoid shape from this, remove the proto-cloak from the plastic and stick it to the model - the dry side should stick well enough by itself, given the likely large contact area with the model.
Only the overall shape and biggest folds are formed now, after that I'll leave it to dry. All smaller contours are added a day (or more) later, by rolling a thin sausage, sticking it on and smoothing the sides to blend in with the rest of the cloak.
Hope that helps a bit, here some pictures of finished cloaks:
-On a Goblin shaman - notice the colour difference, marking which parts are of the original cloak, and which folds are added later on.
-On a Dwarf captain, showing the same.
-No trace left after painting though.
-One to show a more dynamic original cloak - Germanic tribesman.
-Same process, different material - a Viking warlord with a procreate cloak.
