Forex trading is currently one of the most profitable ways to make money without stress. But to make consistent profits, the forex trader must have at least one working strategy.
There are numerous strategies that the forex trader can choose; the goal is to make more profits and little or no losses. One of such strategies is the 50 pips a day forex strategy.
It is a unique strategy that allows you to pick up the early market move of GPBUSD and EURUSD, not excluding some other currency pairs.
Essentially, with this strategy, you are able to capture around half or one-third of your daily move using the GPBUSD, EURUSD, or any other preferred currency pairs. The strategy applies the concept of support and resistance.
It is expedient to state that, to make use of this strategy, you have to be a daily trend trader, just as the name of the strategy implies.
And the best time to make a trade using the 50 pips per day strategy is exactly before the London forex session. Thus, timing is of the essence for this strategy, for it to help you reach your goal of profitability.
In addition, risk management must not be neglected when it comes to the usage of this forex trading strategy. Therefore, stop loss, take profit, etc. must be applied all the time to guarantee a proper risk to reward ratio.
A few of the highlights of this strategy include:
● The strategy works perfectly on the 1hr timeframe of your forex chart.
● There is no need for any indicator, as this strategy is entirely a price action trading strategy.
● It can be used on other currency pairs aside from GBPUSD and EURUSD.
● The currency pair in use must have USD as either the base or quote currency.
● The daily range of your preferred currency pair should be at least 100 pips or more.
To get the best from this strategy, there is a need to apply some rules and setups. This is in a bid to guide you through the process of making profits, instead of losing trades due to gambling. Some of the rules and set-up are expatiated upon below:
For this strategy, the best time you need to make a trade is 7 am GMT, using the 1-hour candlestick on your forex chart.
You should also ensure that the time on your meta trader 4 is the same as 7 am GMT. This can be easily verified using Google to make the time verification based on your time zone.
The trading rules: these are essentially a group of guidelines that must be met to ensure that the strategy plays out in your favor.
● Immediately the 7 am 1-hour candlestick closes; you are to place your trade.
● For your ‘buy stop,’ you are to order 2 pips above the high, and for ‘sell stop,’ order 2 pips below the high.
● Once your pending order gets activated, you are free to close the other pending order with immediate effect.
● 5-10 pips below the low of the 7 am GMT candle is the position to place your stop loss, for a buy order and 5-10 pips above the high for a sell order.
● The target for the take profit is 50 pips.
Once you abide by the rules and you properly make your set up, all you need do is to allow the market to play out on its own. The trend may not always hit the take profit, but this doesn’t imply that you cannot try the next day again.
The design of this strategy is such that you take huge profits when right and make a very small loss when wrong. It is, therefore, to your advantage to trade consistently with confidence and see how huge your profits would become.
In the case where there is a floating profit or floating loss, with the day being over, yet the next daily candle has formed. What you need to do is to close the trade, not minding the floating profit or loss. You could also change your stop loss to your point of entry to ensure break even on the trade.
Pros of 50 pips a day forex trading strategy
● The strategy plays out on its own.
● Few trades, huge profits, no risk of overtrading.
● Good for beginners as they do are not required to learn complicated price patterns, trends, or install indicators.
● The strategy is not applicable to only one market as it is based on market mechanics.
Cons of 50 pips a day forex trading strategy
● Profit is limited to 50 pips (and there are cases where the profit may move up to 200 pips).
● You cannot place many trades in a day.
● You need to watch your chart closely, to avoid having two orders being activated.
Traders using this strategy have come up with certain questions; some ask why the high and low of the candlestick is used.
The perfect answer to this is simply that the high and low stands for the support and resistance of the market which, when broken, leads the trend to follow the predicted direction.
Can a trader pick a particular direction of trade and place orders on just one side?
This brings to mind the very fact that there are times when the price is not following the trend of the trade, and at such times price tends to move in a counter-trend manner.
This is one of the reasons why it is not the best to stick to one side of the trade, as a strong momentum can move, opposing the initial trend at any time.
Is this strategy good for a swing trader?
Though the strategy is for day trading, leaving the order to keep making profits could be beneficial. However, to do this, there is a need to perform technical analysis on the trade trend, to see how strong the buy or sell trend is.
In conclusion, the forex trader that chooses the 50 pips a day forex strategy should note that price may pull back after break out has occurred.
Also, bull trap or bear trap may play out in this strategy, and with your properly set stop loss, you would only get stopped out of the reader with a minimal loss to bear.
Forex trading may not be for everyone, but with this strategy making profits in the forex market is now easy for everyone.