I am seriously into 4x trading – I love it. And because of my 100% focus on making money trading currency, I often get asked “how to make money trading currencies” when it seems most other people lose their money. Let me explain some simple rules.

People usually laugh when I tell them the first rule on how to make money trading currency is simply DON’T LOSE MONEY. But when the see my face they guess correctly I am not joking. How on Earth can anyone make money trading currency if they are losing it. I never did see the joke, I have always been serious about this.

If you are into Forex, you are saying you are into making fast, leveraged profits. It therefore should make sense to you that to make money trading currency, your study should also include how to not lose money trading currency. Study losers and avoid their habits.

Picture this if you will. You start your day and note on say EURUSD H1 chart (Euro versus US dollar: 1 hour per candlestick chart) that there has been a huge plunge of say 150 pips, and then things have leveled out for the next hour or so. I love these times, and I look for a rebound trade expecting that the Euro has been maybe oversold and could easily bounce back by 50 to 100 pips.

Now while it maybe tempting to buy then and there, I play hard ball with the “forex market maker” I will play against by putting in a pending buy order that will only get executed on a sharp dip. That is, I have learned the hard way that even though prices look great for a rebound buy, that there is almost always another sharp dip left in the pair just before it rebounds – and so I pick up my order on that dip.

But on the basis of NOT LOSING MONEY, I also cover my butt by also putting in place an equal trade size of Sell Stop at the same or near same price. That is, I put in place 2 pending orders that carry/equal/cancel out each other. Two things can now happen, either the currency pair completely falls out of bed, in which case my short position is in the money, or I was right about the bounce and my long position is in profit. Of course the other trade executed at the same time cancels out any profits.

And I have each trade with a stop loss that is set at 2% of my account balance. Eg, 20 pips if I am trading 1 pip lots on a $10,000 account. One of these trades will be stopped out. On face value it looks like I therefore have lost 2% of my account, but think about it more carefully – I have lost nothing because the opposing trade is 2% in profit.

Crazy as it may sound, but I use this strategy when I know I must go out shopping but don’t want to miss out on the trade .

OK, we have covered not losing money as the first step. Next comes proper money management. So, rule 2: never risk more than 2% of your account on a trade (read as use stop losses). And rule 3: stop trading if you lose 10% of your account in one day – come back fresh another day, never chase your losses.

Let’s discuss these 2 principles in more detail. Imagine I have a $10,000 trading account. That means that I must have stop losses set at no more than $200 loss in a worst case scenario. If I am trading single, whole lots then my stop must be placed at no more than 20 pips – $10 per pip.

The 2% rule is not just a suggestion. It is a hard and fast rule. If you think your trade needs more than 2% to breath before it finds profit, then that trade is too risky and not worth doing. Go back and look at the beginning of this article where I talk about buying on a dip.

My final point is rule 3: walk away for the day if you lose 10% of your account. Remember, to do that you would have to lose 5-6 trades in a row, one after the other each losing 2%. If your day is going so badly, quit, and come back the next day with a fresh and clear mind.

Summary on how to make money trading currency: Rule 1, don’t lose money. Rule 2, don’t risk more than 2% on a trade. Rule 3, quit the day if you lose 10% of your account.

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