👉 5 Pips per Day Trade Strategy in Detail7 min read
The 5 pips a pay strategy is a popular trading technique in the forex market that aims to make a profit by gaining just 5 pips daily. A pip is a unit of measurement for currency price movement, and it represents the smallest change in the value of a currency pair. The strategy involves identifying a currency pair with high liquidity and low volatility, and then taking a small position, typically just $1 per pip. The trader aims to close their position once they have made a profit of 5 pips.
Many forex traders prefer this strategy due to its simplicity and low risk. They are able to make small profits consistently, which can add up over time if they consistently follow the strategy. Additionally, the low position size also serves to manage the risk involved in trading. However, it is important to note that this strategy may not be suitable for all traders or in all market conditions, and it is important to exercise caution and practice proper risk management techniques when trading in the forex market.
The strategy definition
Strategy “5 Pips a Day” is a popular forex trading strategy that aims to make a profit of 5 pips per day through short-term trades. Pips refer to the smallest unit of price movement for a currency pair.
The strategy consists of identifying a profitable entry and exit point for each trade, typically using technical analysis tools such as chart patterns, indicators, and price action. The trader places a stop loss order to minimize potential losses and sets a profit target of 5 pips. Once the profit target is reached, the trader closes the position and waits for the next setup.
An example of how this strategy works is as follows:
Let’s say a trader is monitoring the EUR/USD currency pair and notices a bullish trend. They identify a good entry point at 1.1000 and place a stop loss at 1.0995, five pips below the entry point. The trader sets a profit target of 1.1005, five pips above the entry point.
If the price moves in the trader’s favor and reaches the profit target, the position is closed and a profit of 5 pips is made. If the price goes against the trader, the stop loss is triggered and the trader exits the trade with a loss of 5 pips.
The main advantage of this strategy is that it is low risk, as the profit target is small and the stop loss ensures that losses are limited. However, the downside is that it may require many trades to achieve a significant profit, and there is a risk of missing out on larger gains if the market moves strongly in one direction. It is important for traders to carefully consider their risk tolerance and overall trading plan before implementing this or any other trading strategy.
How to implement 5 pips a day forex strategy?
In the FX market, also known as the forex market, traders should keep up-to-date with the latest forex news. This is important because trading in forex involves buying and selling currencies, and any economic or political events can have a significant impact on currency prices. Therefore, being informed about global events can help traders make informed decisions.
5 pips a day forex strategy is one of the most popular. This strategy aims to capture just 5 pips per trade, which can accumulate over time to significant gains. To implement this strategy effectively, traders should follow a few crucial steps.
Firstly, they should choose the right currency pairs for their trades. They should look for volatile currency pairs with tight spreads, such as the EUR/USD, GBP/USD, and USD/JPY pairs.
Secondly, traders should set up stop-loss and take-profit orders to manage risk and lock in profits.
Thirdly, traders should identify potential entry points using technical analysis tools, such as support and resistance levels, moving averages, and MACD. Price action patterns, like pin bars and bullish/bearish engulfing patterns, can also confirm the trend.
Fourthly, traders should manage their trades closely and adjust their stop-loss or take-profit levels if necessary. They should also keep an eye on news events that may affect their chosen currency pair and exit the trade if the situation becomes unfavorable.
Lastly, keeping a trading journal can help traders evaluate their performance and make necessary adjustments to their strategy over time. Discipline and patience are key to effectively implementing the “5 Pips a Day” strategy and achieving consistent gains in the forex market.
Key strategy recommendations
- We start trading at least at 12:30 GMT. There should be no important news. But if there are any, we are waiting for the news.
- We take the usual indicator Momentum 5 and the average SMA line with a period of 20.
- A signal to Buy is the closing of the candle, Momentum must be above the moving average.
- To open on Sell, wait for the candle to close under SMA with a period of 20, Momentum – under SMA.
- To close the deal, wait until the SMA is crossed in the opposite direction.
- Sl and Tp set in 20 points. If possible, switch on a trading stop of 1 pp or you can move your hands to breakeven after 10 pp.
- You can open a deal once a day.
Strategy 5 Pips a Day is a simple yet effective trading strategy that can help you achieve consistent gains in the forex market. However, it requires discipline and patience to stick to the rules and effectively manage your trades.
Advantages of strategy “5 pips per day”
The Strategy “5 Pips per Day” is a forex trading technique that aims at generating small but consistent profits over time. The following are advantages of using this strategy:
- Low-risk. The strategy focuses on trading with small trade sizes, which minimizes the risks of significant losses. It allows traders to maintain their trading capital and keep the losses to a minimum.
- Consistent profits. The strategy targets small profits of 5 pips a day, which may seem small, but can add up to significant gains over time. This approach is more sustainable in the long run and reduces the temptation to take risky trades.
- Reduced stress. Trading using this strategy is less stressful since the trader takes a longer-term perspective and does not fixate on big wins that may be difficult to achieve. This approach helps to eliminate the anxiety associated with chasing big profits quickly.
- Suitable for novice traders. The technique can be used by novice traders who are new to forex trading since it requires minimal knowledge of the markets and technical analysis. The trading approach is relatively straightforward and can help such traders to gain confidence and experience.
- Easy to implement. The trading technique can be automated or applied manually, depending on the trader’s preferences. It is easy to implement and can be applied to various currency pairs, which makes it flexible and adaptable to different market conditions.
The strategy of generating small but consistent profits through the Strategy “5 Pips a Day” is an effective approach to forex trading. It reduces risks, minimizes stress, and can result in significant gains over time. This technique is suitable for novice traders and is easy to implement, making it a popular choice among forex traders.
Limitation of the strategy “5 pips a day”
Strategy “5 Pips a Day” is a trading technique that aims to earn 5 pips daily from the forex market. However, it has some limitations that traders should take note of.
Firstly, this strategy may involve risks. Forex trading is inherently risky, and relying on earning a consistent 5 pips daily may lead to losses if the market moves against your position.
Secondly, patience and discipline are necessary to implement this strategy effectively. Traders need to wait for the right opportunities to execute their trades and avoid making impulsive decisions.
Lastly, managing your trades is crucial to the success of this strategy. Traders need to have a clear exit plan and avoid holding onto losing trades, which may lead to bigger losses.
In summary, while the strategy 5 Pips a Day can potentially be profitable, traders should be aware of its limitations, including the risks involved, the need for patience and discipline, and the importance of managing trades effectively.
Tips for successful trading with the strategy
Here are some practical tips for traders looking to use the Strategy “5 Pips a Day” effectively:
- Focus on risk management: Managing risk is crucial in any trading strategy, and the Strategy “5 Pips a Day” is no exception. Make sure to limit your position size, use stop-loss orders, and avoid overleveraging.
- Plan your trades: Plan your trades in advance and stick to your plan. Determine your entry and exit points, and do not deviate from them unless there is a compelling reason to do so.
- Keep a trading journal: Keep a journal of your trades to track your performance and identify areas for improvement. Analyze your winning and losing trades to learn from them.
- Be patient: Trading with the Strategy “5 Pips a Day” requires patience, as it aims to capture small gains over time. Do not chase trades or try to force profits.
- Practice mental discipline: Trading can be emotionally challenging, and it’s essential to stay disciplined and avoid impulsive decisions. Set realistic goals, and maintain a positive mindset to avoid self-sabotaging behavior.
By following these tips, traders can effectively use the Strategy “5 Pips a Day” and increase their chances of success in the forex market.
The Strategy “5 pips a day” can be a helpful tool for traders seeking to consistently make small gains in the forex market. However, it is important to remember that success in trading requires discipline, patience, and a comprehensive understanding of market dynamics. This strategy should be used as a supplement to a well-rounded trading plan that considers factors such as risk management, market analysis, and a clear understanding of individual goals and objectives. With dedication and diligent practice, the “strategy 5 pips a day” may contribute to long-term success in the forex market.