How to Make Money Trading Currency
You can make big money online, more specifically you can make money trading currency IF you follow some simple rules. Break these rules and you will be a loser with a capital L, but follow them and you don’t need a college degree in rocket science to be a winner and full time 4x trader like me.
The first rule might sound obvious and stupid to even point out, but the first rule to make money trading currency is DON’T LOSE ANY. Yes, it sounds silly, but far too many forex traders forget this fundamental rule.
If you study success (success at anything), then one of the main principles taught by success teachers is to “study failure, and then don’t do those things”. This is very important! You will make a lot more money trading currencies IF you stop losing money.
My favorite currency pair is the EURUSD. An old habit if you will, but let me use the EURUSD h1 (1 hour chart) as an example. You wake in the morning to see a massive plunge (or rise, I don’t care) of say 160 pips. Things have been flat for an hour or four. It doesn’t matter. A rebound is what does matter, that’s your thinking as you wipe the sleep from your eyes.
There are trends and there are dips in the forex markets. After a huge drop in a currency it is normal and typical that there be a large rebound in the price. Also true is that just before that rebound there is almost always a dip first, then the powerful rebound. On the other end of every trade we all make there is another 4x market maker. Even though we don’t know or even care who he is, we are here in the market to take his money from him. Silly him to play against us. We buy on a further dip and then we take him for all he can handle losing.
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.
With proper use of stop losses (I won’t go into detail about this here), what ever happens will happen, and shortly thereafter one of the trades will close out at a (small) loss but in fact I have lost no money because the opposite trade is in profit to that level.
This trade set up and entry is very safe. It gives a great opportunity to make money trading currency with no likely downside. It allows you to do 2 minutes work, then leave the computer for several hours to come back and find out what happened.
This matter of not losing money however raises the issue of correct money management. Never, and I do mean NEVER have more than 2% of your capital at risk in a trade. And stop trading entirely for the day if you have lost a total of 10% of your capital in the same day.
On a $10,000 account trading single lots, then 2% is $200 or a stop loss of 20 pips. If I get stopped out, then I have $9,800 left, and 2% of that is $196 – or 19 pips. That is, the dollar amount of your next maximum risk gets smaller and smaller with each loss.
If I do this then I can never bust my account. If I lose $200 by being stopped out, then I have $9,800 left. And a 2% maximum risk for the next trade based on one full lot trade forces me to put my stop at 19 pips. If I lose again, then I have $9,610 left, and can go another trade with a 19 pip, 2% stop. As my trades continue to fail, my stops get smaller pips set, or my trades get smaller lot sizes.
OK, next point – walk away if you lose 10% in a day. I can’t remember the last time this happened to me, but it is a rule I will always follow. The simple fact is that some days you just cannot put a foot right. Everything you do just crosses over everything you know and costs you money. Based on never risking more than 2% a trade, walking away if you lose 10% in a day gives you 6 consecutive loses in a row before you close your trading for the day.
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.
Phil Jarvie is a very experienced forex trader and sees profits where others lose. It could be worth your while to visit his FREE website where he talks about money trading currency and make money with automated trading robots