Forex trading can be a highly profitable venture when done right. However, it can also be a difficult one, especially for beginners who may not know how to navigate the market. One of the most important things to learn as a forex trader is how to add pips to your trades. This article will explain how to add 20 pips in forex and give you some tips on how to do it.
What are Pips?
Before diving into how to add pips, it is essential to understand what pips are in forex. Pips refer to the smallest price movement that a currency pair can make. In most currency pairs, a pip is the fourth decimal place, except for currency pairs that involve the Japanese yen, where a pip is the second decimal place.
For example, if the EUR/USD is trading at 1.1200 and moves to 1.1201, that is a one-pip move. When trading forex, traders use pips to calculate profits and losses. Therefore, adding pips to your trades can increase your profit margin.
How to Add 20 Pips in Forex
Here are some tips on how to add 20 pips to your forex trades:
1. Use Stop Loss Orders
Stop loss orders are one of the most essential tools in forex trading. They help traders limit their losses in the event of a trade going against them. By using stop loss orders, traders can ensure that they do not lose more than they can afford to lose.
To add 20 pips to your trades, you can use a stop loss order to protect your trade. For example, if you are trading the EUR/USD pair and you buy at 1.1200, you can set a stop loss order at 1.1180, which is 20 pips below your entry price. This way, if the trade goes against you, you will only lose 20 pips.
2. Use Take Profit Orders
Take profit orders are another tool that traders can use to add pips to their trades. A take profit order is an order placed by a trader to close a trade automatically when the market reaches a certain level. By using take profit orders, traders can lock in profits and ensure that they do not miss out on potential profits.
To add 20 pips to your trades, you can use a take profit order to close your trade automatically when it reaches 20 pips in profit. For example, if you buy the EUR/USD pair at 1.1200 and set a take profit order at 1.1220, your trade will automatically close when the market reaches 1.1220, giving you a profit of 20 pips.
3. Use Technical Analysis
Technical analysis is a method of analyzing price charts to identify trading opportunities. By using technical analysis, traders can identify potential entry and exit points for their trades. Technical analysis can help traders add pips to their trades by identifying support and resistance levels, trend lines, and chart patterns.
For example, if you are trading the EUR/USD pair and you notice that the price is approaching a strong resistance level at 1.1220, you can place a sell order at that level, with a stop loss order at 1.1240, which is 20 pips above your entry price. This way, if the price is rejected at the resistance level, you can profit from the trade.
4. Use Fundamental Analysis
Fundamental analysis is a method of analyzing economic and financial data to identify trading opportunities. By using fundamental analysis, traders can identify the underlying factors that are driving the market and make informed trading decisions.
To add 20 pips to your trades using fundamental analysis, you need to pay attention to economic data releases and news events that can impact the market. For example, if the US Federal Reserve announces a rate hike, you can expect the US dollar to strengthen against other currencies. In this case, you can place a sell order on the EUR/USD pair and set a stop loss order 20 pips above your entry price.
Conclusion
Adding 20 pips to your forex trades can increase your profit margin significantly. The tips outlined in this article, including using stop loss orders, take profit orders, technical analysis, and fundamental analysis, can help you add pips to your trades. However, it is important to remember that forex trading is risky, and there is no guarantee that you will make a profit. Therefore, it is essential to use risk management strategies and always trade with a plan.
