Are you looking for a forex trading strategy that can earn you a steady income stream with minimal risk? The 50 pips a day forex strategy could be perfect for you. This straightforward system aims to capture 50 pips of profit each day on one trade. While no trading method is foolproof, this strategy combines analysis and risk management to boost the odds of profitable trades.
In this comprehensive guide, we’ll cover everything you need to know about the 50 pips a day forex trading strategy. You’ll learn how it works, tips for implementation, and whether it could be suitable for your trading style. Let’s dive in!
How the 50 Pips a Day Strategy Works
The core concept of the 50 pips a day forex strategy is to identify one high-probability trade per day and target 50 pips of profit on it.
Traders implementing this strategy will analyze the charts to spot a clear trend. The ideal situation is a strong trend on the 1-hour chart of a major currency pair like EUR/USD or GBP/USD.
Once a trend is identified, the trader will look to enter a trade in the direction of the trend. They will set a stop loss 25-30 pips away and a take profit order for 50 pips.
So if the EUR/USD chart shows an uptrend, the trader would go long (buy) with a stop loss 25-30 pips below entry and a limit order to close the trade for a 50 pip profit.
The trader doesn’t need to sit and actively monitor the market all day. They simply identify the one quality trade setup, enter it, and set the stop loss and take profit. If the trade hits 50 pips, great, if not then the stop loss preserves capital.
The risk on each trade is very controlled, while the potential reward is large relative to the risk. Over time, capturing just 50 pips of profit per day can compound into very impressive returns.
Tips for Implementing the 50 Pips a Day Strategy
Here are some tips to implement the 50 pips per day strategy successfully:
- Trade the major currency pairs. Stick to the majors like EUR/USD which tend to trend smoothly. The exotic pairs are more volatile and choppy.
- Trade the 1-hour chart. Use the 1-hour timeframe to identify trends and enter trades. The daily chart can be used to assess the broader trend.
- Trade with the trend. Only take buy trades in uptrends and sell trades in downtrends. Going against the larger trend greatly reduces odds of success.
- Confirm the validity of the trend. Use indicators like the moving average to confirm a genuine trend. Or wait for a break of the high or low of the previous 1-hour candle.
- Use a stop loss of 25-30 pips. This limits the risk on each trade to a maximum of 30 pips. Move your stop loss to breakeven once 20-30 pips are captured.
- Target 50 pips profit. Close half the position at 50 pips and let the rest run with a trailing stop loss. Exiting at a fixed target helps enforce disciplined trading.
- Manage risk. Risk no more than 1-2% of your account on each trade. Reevaluate if losses mount or if market conditions change.
- Record and review your trades. Keep a journal of your trades to stay accountable and identify any changes needed in your approach.
Advantages of the 50 Pips a Day Forex Trading Strategy
The main advantages of this simple forex strategy include:
- Low Risk – With a 25-30 pip stop loss on trades, risk is capped at a small amount. This prevents any single trade from severely damaging the account.
- High Reward – Targeting 50 pips captures a solid reward relative to the amount risked. A positive risk to reward ratio boosts long term profitability.
- Simplicity – Looking for one high-probability trade per day is simple versus juggling multiple positions or complex strategies. Easy to implement for beginners.
- Requires Little Time – Spending a few minutes each morning analyzing the charts is all that’s needed. No need to sit at the computer all day monitoring price action.
- Scalable – This strategy can be used with accounts of all sizes. Adjust position size appropriately for the account balance.
- Consistent Pips – Steadily capturing 50 pips daily is realistic, leading to stable equity growth rather than unpredictable home runs.
The Risks and Drawbacks of the 50 Pips a Day Strategy
Although the risks are lower compared to other trading strategies, some drawbacks exist:
- Stopped Out Trades – Not every trade will hit the 50 pip target before being stopped out. Stopped out trades must be minimized.
- Illiquid Markets – During holidays or periods of low volatility, it may not be possible to capture 50 pips in the market.
- Overleveraging – Traders may be tempted to use excess leverage which would invalidate the cautious approach of this strategy.
- Complacency – Repeatedly reaching the daily goal may lead to complacency in trade analysis and execution.
- Missed Opportunities – Focusing on one trade per day could mean missing other promising market moves. But trying to capture multiple moves increases risk.
- Mechanical Trading – Traders may become too mechanical versus adapting to evolving market conditions over time.
So while this strategy has edged for day trading forex, traders should be aware of the risks and plan accordingly. Stopped out trades and temporary market illiquidity are mostly unavoidable.
Is the 50 Pips a Day Strategy Right for You?
You’re likely to achieve the best results with this strategy if:
- You’re a beginner trader looking for an easy but effective strategy. The rules are simple to learn.
- You want to limit risk. The small stop loss relative to potential reward reduces risk.
- You prefer flexible trading. You can trade part-time around other commitments.
- You have patience. Not every trade will work out, perseverance and discipline is key.
- You like following trends. Trading with the larger trend improves odds of pips.
- You want to target daily profit milestones. Hitting a 50 pip daily target provides a sense of accomplishment.
This strategy may not be ideal if:
- You have an aggressive risk appetite. The small position sizes and target profits require patience.
- You prefer active intraday trading. This strategy only looks for one setup each day.
- You dislike technical analysis. You’ll need to assess chart patterns and indicators.
- You want big price movements. 50 pips per day is great but doesn’t capture huge wins.
- You have a small account balance. The capped downside means you may have to use too much leverage on small accounts.
So in summary, the 50 pips per day strategy works best for beginner to intermediate traders with a moderate risk appetite and desire for steady results.
Getting Started with the 50 Pips a Day Strategy
Here are some tips for getting started:
- Start small – Trade micro lots in a demo account to refine your skills before risking real capital.
- Develop your analysis skills – Study chart patterns, trends and indicators so you can identify quality setups.
- Master your trading platform – Ensure you can efficiently enter and exit trades on your platform.
- Create a trading plan – Define your risk management rules, trade criteria and analysis process before you trade live.
- Set a reasonable daily target – Consider starting with a 25 pip target, then increasing to 50 pips over time.
- Avoid overtrading – Stick to the one trade per day plan, don’t try to overcompensate for missed targets.
With the proper preparations, the 50 pips per day strategy can set you on the path to achieving your forex trading goals!
Frequently Asked Questions About the 50 Pips a Day Strategy
What pairs can you trade with this strategy?
The major currency pairs like EUR/USD, GBP/USD and USD/JPY work best for this strategy. Their liquidity makes it easier to get in and out of trades smoothly. The minor pairs and exotics tend to be more erratic.
What timeframe should be used?
Analyze the 1-hour chart to find trading opportunities and define entry levels. Sometimes the 4-hour chart can be checked for an overarching trend bias. Avoid lower timeframes that cause overtrading.
What trading session is best?
The London session between 3am to 12pm EST sees good trends and volatility to capture 50 pips. Liquidity dies down in the Asian session. The New York session has opportunities but tends to be choppier.
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Do you have to quit after one trade?
The ideal scenario is to make one trade targeting 50 pips and be done for the day. However, some flexibility is fine as long as good risk management is maintained. Don’t overtrade by forcing mediocre setups.
How do you confirm a trend?
Use the 50-period and 100-period simple moving averages on the hourly chart. Only trade in the direction where the shorter SMA is above or below the longer SMA. Also watch for breakouts of previous candle high or low.
Can this work on any time frame?
The best results come from entering on the hourly chart in the direction of the trend on the 4-hour or daily charts. Lower timeframes result in too many false signals and overtrading.
How do you determine your stop loss and take profit?
Place the stop loss 25-35 pips away from entry depending on volatility and risk tolerance. Set a take profit order for 50 pips. Adjust these levels if the daily ATR suggests wider or narrower ranges.
How do you adjust your position size?
Position size depends on your account size and risk tolerance. Generally risk 1-2% of your account per trade. So with a $10,000 account, risk $100-$200 per trade. Use a position size calculator for exact sizing.
What is a sensible daily profit target?
50 pips per day is a sensible target to aim for while learning this strategy. As you gain experience, you may be able to target 100 or more pips on days with major trends and volatility. But maintain sound risk management.
Key Takeaways on the 50 Pips a Day Forex Trading Strategy
Here are the key points covered about the 50 pips a day forex day trading strategy:
- It aims to capture 50 pips per day from one high probability trade on the 1-hour chart.
- Traders identify a trend on the 1-hour chart and trade in the direction of that trend.
- Stop loss orders are placed 25-35 pips from entry to limit downside.
- Take profit levels are set at 50 pips which provides a solid risk reward ratio.
- Benefits include simplicity, flexibility, and stable returns. Risks include occasional stopped out trades and overtrading.
- Pay attention to risk management, analyze charts diligently, and target 50 pips per day. Over time, results can compound positively.
The 50 pips a day forex strategy could be an excellent fit for beginner traders aiming for consistent profits from their trading. If executed properly, this straightforward approach has the potential to steadily build up your trading account.
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