Making 20 pips a day in forex trading may seem like a daunting task, but with the right strategy and discipline, it is achievable. In this article, we will discuss the steps to take to make 20 pips a day in forex trading.
What are Pips?
Before we delve into how to make 20 pips a day, it is essential to understand what a pip is. A pip is the smallest unit of measurement in forex trading, and it represents the fourth decimal point in a currency pair. For instance, if the EUR/USD pair is trading at 1.1200, and it moves up to 1.1201, that is a one pip movement.
Step 1: Choose the Right Currency Pair
The first step to making 20 pips a day in forex trading is to choose the right currency pair. Not all currency pairs have the same volatility, and some pairs are more volatile than others. Volatility is essential as it determines the price movement and the potential for profits. Currency pairs such as EUR/USD, GBP/USD, and USD/JPY are highly liquid and have a high level of volatility, making them ideal for day trading.
Step 2: Use a Trading Strategy
A trading strategy is a set of rules that guide a trader on when to enter and exit trades. To make 20 pips a day consistently, it is essential to have a trading strategy that works. There are different trading strategies such as scalping, swing trading, and trend following, but the most important thing is to choose a strategy that suits your trading style and personality.
Step 3: Use Technical Analysis
Technical analysis is the study of past price movements and patterns to predict future price movements. To make 20 pips a day, you need to use technical analysis to identify potential entry and exit points. Technical analysis tools such as moving averages, trend lines, and support and resistance levels can help you identify these points.
Step 4: Manage Risk
Risk management is crucial in forex trading as it helps traders minimize losses and maximize profits. To make 20 pips a day, you need to manage your risk effectively. One way to do this is by using stop-loss orders to limit your losses. A stop-loss order is an order that automatically closes a trade when the price reaches a predetermined level.
Step 5: Use Proper Money Management
Money management is the process of managing your trading capital to ensure that you do not overtrade or risk too much on a single trade. To make 20 pips a day, you need to use proper money management techniques such as risking only a small percentage of your trading capital on each trade.
Step 6: Stay Disciplined
Discipline is crucial in forex trading as it helps traders stick to their trading plan and avoid emotional decisions. To make 20 pips a day consistently, you need to stay disciplined and follow your trading plan. Avoid making impulsive decisions based on emotions such as greed or fear.
Conclusion
Making 20 pips a day in forex trading is achievable with the right strategy, discipline, and risk management. It is essential to choose the right currency pair, use a trading strategy, use technical analysis, manage risk, use proper money management, and stay disciplined. Forex trading requires patience, persistence, and continuous learning, but with the right approach, it can be a profitable venture.
