It’s not news that many things in life are difficult to understand, including the Forex market. If you aren’t keeping tabs on the USD’s reaction to the Fed’s most recent remarks, you’re probably reading international news in an effort to predict changes in currency rates. However, not all forex trading has to be difficult! Whether you’re just getting your feet wet in the forex market or are an experienced trader looking to take things easy, certain simple strategies can improve your trading journey.
If you’re searching for a straightforward approach to the forex market, the 50 pips a day strategy is for you. This review will explain what this strategy is, how it works, and what you need to know before implementing it in your trades.
What is the 50 Pips a Day Forex Strategy?
The 50 pips a day Forex strategy was developed for day trading and is meant to work on chart timeframes of one hour. However, you are free to use it on any currency pair or chart timeframe that you prefer. The main goal of the method is to try and take advantage of the intraday volatility of a currency pair. For this trading strategy, the ideal currency pairings to use are the major ones, such as the GBP/USD and the EUR/USD. This is because they have plenty of liquidity which means you can catch some good market moves if you time your entry and exit well.
How to trade the 50 Pips a Day Forex Strategy?
Now, let’s have a look at the details of how to execute this trading strategy.
- The first major step occurs at the closing of the 7 AM GMT candlestick. As soon as this occurs, you might look to enter two contradictory pending orders: a buy-stop order 2 pips above the high point, and a sell stops order 2 pips below the low point.
- As the two currencies move in opposite directions, one of the pending orders will be filled. As soon as this occurs, you could cancel the other order.
- Controlling trading risk is your goal now. To achieve this, set a stop-loss order of 5-10 pips above or below the high or low, respectively. If the candlestick is too short, you might be exiting too close to the current price; in this case, you could set your stop loss or take profit 15-20 pips away.
- Set a 50-pip profit target based on this system, or use your own take profit depending on your money management strategy.
- Relax and enjoy the ride! Just wait for the expected market swings to occur, either in your favour or against you.
This gives us a set of two possible outcomes. The first one sees you successfully meeting your profit targets. Yay! Well done! In other words, go have some fun, and then come back tomorrow to do it all over again.
Of course, another possibility is that you may fall short of your expected profit and instead end up with an account in the red. Whatever your profit or loss was for the day, you may get out of the trade and try again tomorrow. To avoid more losses, you can raise your stop loss to the break-even point and wait until the 7 a.m. GMT candlestick of the following day to place your next trade.
Regardless of the outcome, the last step is to repeat the process the next day if you want to maintain consistency with the 50 pips a day strategy. Day trading techniques like this one become less of a hassle as trading becomes more accessible, free, and flexible thanks to technological advancements such as modern trading platforms and apps.
Buy Signal
- When the 7 a.m. GMT candlestick has closed, start by placing a buy-stop order 2 pips above the high.
- It’s likely that the price will pump, triggering your buy orders or drop causing you to lose enough money to trigger your stop loss.
- If you want to minimize losses, set your stop-loss order 5-10 pips above the candle’s low.
- Set your take-profit level at 50 pips or according to your own risk preference.
Sell Signal
- When the 7 a.m. GMT candlestick has closed, start by placing a sell-stop order 2 pips below the low.
- The price will likely drop, triggering your sell order or pump causing you to lose enough money to trigger your stop loss.
- If you want to minimize losses, set your stop-loss order 5-10 pips above the candle’s high.
- Set your take-profit level at 50 pips or according to your own risk preference.
50 Pips a Day Forex Strategy Pros & Cons
Pros
- Indicators are not used in this strategy so we trade based on price action.
- Stops you from making too many trades (5 trades per week).
- There is no need to constantly check the market.
Cons
- There is a daily limit of one trade per asset.
- There can be many false signals and losses.
- Daily trading earnings are capped at 50 pips.
Conclusion
Even though the 50 pips a day Forex strategy is popular and can catch some good currency pair moves, it is not risk-free. Some traders may be tempted to utilize high levels of leverage to boost their profits, but they should be aware that this strategy has the same effect on losses as it does on profits. Keep detailed records of your successes and failures so you can compare the effectiveness of this method to others you’ve tried. Also, remember to cancel the second pending order and set stop-loss orders. Most of all, only practice on a demo account until you start seeing some consistent success over the long run. Never ever risk more than you can afford to lose.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
