Are you looking for a forex trading strategy that can generate consistent profits each day with low risk? The 50-pips a day forex strategy aims to capture 50 pips of profit from the markets every single day. While no trading strategy succeeds 100% of the time, this approach provides a structured, probability-based system to target high probability trades with pre-defined risk management.
In this comprehensive guide, we’ll cover everything you need to know about the 50-pips a day forex trading strategy. You’ll learn the key concepts behind this high reward, low risk approach and how to implement it in your own trading. Let’s get started!
How the 50-Pips a Day Strategy Works
The core principle behind the 50-pips a day forex strategy is to identify high probability price action trading setups. These setups have a statistically better chance of producing a profitable trade.
By targeting 50 pips of profit per day on average, a trader can potentially generate over 1,000 pips of profit in a month. Compounding these gains over time leads to significant account growth.
Here are the key aspects of this trading approach:
- Trade higher timeframes – The strategy focuses on the daily or 4-hour charts for identifying trades. This provides more reliable trade signals.
- Define entry rules – Trades are entered based on specific candlestick patterns, momentum indicators, and other confirmation factors. Strict entry criteria improve profitability.
- 1:2 risk-reward ratio – Each trade targets 2x the potential reward vs the risk taken. This skew leads to positive expectancy over many trades.
- Disciplined risk management – Only risk 1-2% of capital per trade. Use stop losses and take profit levels to manage risk vs reward.
- Capture part profits – Scale out of winning trades to lock in partial profits as the trade moves in your favor.
By combining these key elements, the 50-pips a day strategy aims to methodically grow accounts over time. Patience and discipline are required to achieve the full potential.
Choosing the Right Currency Pair
When it comes to trading forex, all currency pairs do not offer equal opportunities. The characteristics of each major, minor and exotic currency will impact results.
When selecting a pair to trade, consider factors like:
- Volatility – More volatile pairs like GBPJPY offer larger price swings to potentially capture daily targets faster. Less volatile pairs like EURUSD may require wider stops and more patience.
- Spreads and commissions – Pairs like EURUSD tend to have tighter spreads, reducing transaction costs. Exotics can have wider spreads.
- Trading hours – Pairs featuring the Japanese Yen (JPY) or Australian Dollar (AUD) allow trading during Asian Pacific hours. Other pairs limit trading to European or US market hours.
- Risk sentiments – Pairs like USDCHF tend to be “risk-off” assets, rising in times of market uncertainty. Pairs like AUDUSD are “risk-on” and benefit from growth optimism.
- Correlations – Some pairs move in tandem while others may inverse. Know how different currency correlations affect hedging risks.
While every pair may offer trading potential, consider focusing your 50 pips a day strategy on 2-3 pairs that best match your trading plan criteria.
Selecting the Right Timeframes
Higher timeframes like the daily or 4-hour charts are recommended when trading the 50-pips per day strategy.
These longer timeframes provide:
- More reliable trade signals and confirmed breakouts
- Ability to capture larger moves and daily range extensions
- Flexibility in trade entry and exit timing
- Avoidance of false signals and choppy price action
The key is ensuring your stop loss and take profit targets are able to capture a minimum 1:2 risk reward ratio based on the average daily range or volatility of the pair.
Smaller timeframes tend to provide more trading signals but less follow-through, requiring tighter stops and more frequent trade management.
When starting out, focus your analysis and trade entry on the daily or 4-hour timeframes for the best results. You can later incorporate shorter timeframes for entry confirmation.
Defining Optimal Trade Entry Rules
Disciplined trade entry rules are vital for long-term success trading any system. The 50-pips a day forex strategy uses specific candlestick patterns, momentum indicators, and other confirmation factors across different timeframes to trigger high probability trades.
Some potential entry techniques include:
- Pin bar breakout with momentum indicator confirmation
- Inside bar breakout with increased volatility and volume
- False breakout pullback entries
- Bullish/bearish engulfing patterns showing strong reversals
- RSI divergence combined with chart pattern failure
- Double bottom / double top reversals confirmed by momentum indicator crossover
- Price rejection of 20 or 50 EMA showing change in trend direction
- MACD crossover combined with support / resistance level bounce
Other Confirmation Factors
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- Round number psychological price level rejection or breakout
- Significant increase in volatility anticipating a larger price swing
- Confirming price action such as widening Bollinger Bands or increase in trading volume
By waiting for 2-3 of these entry factors to align before triggering a trade, the odds of success improve substantially.
Always use a stop loss when entering trades based on clear support or resistance levels. Target at least 2:1 reward for each trade.
Effective Trade and Risk Management
Managing your trades and capital at risk is vital for long-term trading success. Without proper trade management, even the best trading strategy will fail.
Here are key trade and risk management guidelines:
Appropriate Position Sizing
- Risk only 1-2% of account per trade
- Use proper stop loss size based on volatility and risk tolerance
- Adjust position size up or down based on account growth
Take Profit and Stop Loss Levels
- Set initial take profit target at 2x risk or greater
- Move stop loss to breakeven once trade is halfway to target
- Trail stop to lock in profits as trade moves favorably
Partial Profit Taking
- Scale out of winning trades in increments, e.g. 25% at 2:1, 50% at 3:1, 25% at 4:1
- Book partial profits to lock in gains as targets are reached
- Give winning trades room to extend targets rather than exiting prematurely
- Cut losses quickly per trading plan rules
- Avoid averaging down on losing trades
- Reduce position sizes during losing streaks or high volatility
- Take breaks to avoid revenge trading or overtrading
- Balance prudent risk management with allowing profits to run
The 50-pips a day target is an average – some trades will achieve much larger targets, while others may be stopped out for smaller losses. Stay focused on your edge over many trades.
Realistic Expectations Over Different Timeframes
Achieving exactly 50 pips per day in profits is not realistic for most retail traders. However, this strategy aims to capture an average of 50 pips of profit each day over time.
Setting realistic expectations is important when assessing your results:
Daily – On an individual day, profits may be higher or lower than 50 pips on a single trade or collective day’s trades. Some days have no profitable trades. Maintain a big picture perspective.
Weekly – Aim to average 50 pips per day over each trading week. Some weeks will exceed targets, others may have a drawdown. Assess weekly performance to ensure profitability.
Monthly – Over the course of a month, expect an average of 1,000 pips of profit from the strategy if trading 20 days per month. There will be winning and losing months. Focus on the overall trend.
Quarterly/Annually – Continued application of the strategy over quarters and years will generate substantial compounding returns. Periodic drawdowns are normal and expected. Stay consistent.
Traders should set daily, weekly and monthly profit targets then assess performance across both winning and losing periods. Your targets may differ based on account size, risk tolerance and other factors.
Optimizing the Trading Strategy As You Gain Experience
While the core principles of the 50-pips a day strategy remain the same, traders should aim to refine and improve their trading plan over time as they gain experience.
Ways to potentially optimize the trading strategy include:
- Keeping detailed statistics on which trade entries work best
- Adjusting which currency pairs you focus on trading
- Fine-tuning entry rules, stop loss levels, and target areas
- Modifying position size and risk management based on results
- Improving trade timing based on sessions, volatility, or technical indicators
- Incorporating advanced techniques like hedging correlated pairs
- Focusing your trading during the hours/sessions where you see the best results
- Assessing differences between fundamental vs technical approaches
The key is to remain flexible and keep evolving your trading plan based on performance data and market changes over time. You should expect periodic drawdowns and be able to weather the losing periods by sticking to your edge.
FAQs About the 50-Pips a Day Forex Trading Strategy
What is the best currency pair to trade for 50 pips a day?
The best forex pair to trade is the one that fits your trading plan criteria and schedule. More volatile pairs like GBPUSD and GBPJPY offer larger intraday price swings but comes with wider stop losses. EURUSD is less volatile but has lower pip potential. Trading multiple correlated pairs can provide more opportunities.
What timeframes work best for this trading strategy?
Analyzing the daily and 4-hour timeframes provides the most reliable trade signals. The higher timeframes allow bigger moves to play out, enabling larger profit targets. Shorter timeframes can be incorporated once you are comfortable, but use the higher timeframes for entries.
How much capital do I need to make 50 pips per day?
You can start trading this strategy with an account as small as $500 if using proper risk management with 1-2% risk per trade. More capital allows greater position size flexibility. Set daily/weekly/monthly profit targets based on your account size and risk tolerance. Compounding returns can grow accounts substantially over time.
Is it possible for a beginner trader to make 50 pips per day consistently?
Achieving the 50 pips a day target requires practice and screen time to gain experience. Beginners should expect a learning curve. Focus on developing strong risk management habits and studying past trades to identify your profitable patterns vs areas of weakness. Review results weekly and monthly with a trading journal.
Why is a 1:2 risk-reward ratio recommended for this strategy?
Aiming for at least 2x profit vs the amount risked creates positive expectancy. If you win 50% of trades targeting 2:1, you will be profitable overall. Not every trade needs to be 2:1, but shooting for that ratio accounts for losses and transaction costs while giving winners room to run.
When trading multiple pairs, won’t the trades correlate?
Trading correlated pairs like EURUSD and AUDUSD does carry correlation risk. Look to manage risk across pairs by reducing position size accordingly. Scaling in and out of trades incrementally also helps reduce exposure. Consider diversifying with some non-correlated pairs as well. Manage overall portfolio risk.
The 50-pips a day forex trading strategy provides retail traders with a structured approach to potentially generate consistent profits from the currency markets. By trading higher timeframes and targeting just 50 pips per day on average, traders can compound gains over time while managing risk.
No strategy succeeds 100% of the times. Losing streaks and drawdowns will occur. The key is maintaining trading discipline and executing your edge with probabilistic entries, appropriate risk management, and consistent performance tracking.
Use the guidelines provided to create your own tailored trading plan based on your schedule, personality, and risk preferences. Expect a learning curve while continually refining your strategy. With the proper skills and habits, capturing 50 pips per day is an achievable goal for dedicated forex traders.
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