This system is called 10 Pips A Day Forex Trading Strategy and in here you will learn its rules.
Sadly, the 10 Pips a Day Trading Strategy is the least considered strategy, because most people think that can make fast money in Forex trading. The truth is, losing money fast is much more common amongst traders, than making fast money.
This is a trading system based on 2 Exponential Moving Average (EMA) indicators and Relative Strength Index indicator.
The Idea Behind The 10 Pips A Day Forex Trading Strategy
The idea behind the 10 pips a day forex trading strategy is similar to the 20 pips a day forex trading strategy:
- In the forex market, many currency pairs travel more than 100 pips a day. However, the problem is that nobody can capture the whole of that daily price move unless you are a time traveler or a prophet. So why not get a little part of that daily move and just aim for 10 pips a day.
- And once you’ve hit 10 pips profit for the day, you stop trading. Next day, you trade again and aim for 10 pips profit and once you hit it, stop trading and the process repeats daily.
Timeframes For the 10 Pips A Day Forex Trading Strategy?
Preferred timeframes are:
- 5 minutes.
- 15 minutes.
Currency Pairs That Can Be Traded?
It is suggested that you only trade currency pairs with low spread between 1-2 pips. Check Pepperstone spreads. Currency pairs like the following are you best options:
- EUR/USD
- GBP/USD
- USD/CHF
- USD/JPY
- AUD/USD
Forex Indicators For The 10 Pips A Day Forex Trading Strategy
You need 3 indicators:
- 5 EMA
- 12 EMA
- RSI
Sell Trade Setup For 10 Pips A Day Trading Strategy
On the 15 minute chart of AUDUSD below, you can see what a sell trade setup of 10 pips a day trading strategy would look like:
- 5 EMA must cross the 12 EMA and go down.
- Look at the relative strength index indicator (RSI) to see if the line has crossed down past the 50 level.
- Sell at the market or place a pending sell stop order 2-3 pips under the low of the candlestick that coincides with the 5 EMA and 12 EMA crossover.
- Place your stop loss above the high of the previous candlesticks.
- Take profit target as you know would be 10 pips.
Buy Trade Setup for the 10 Pips A Day Trading Strategy
For the buy trade setup, you do the exact opposite of a sell trade setup:
- 5 EMA must cross the 12 EMA and go up.
- Look at the RSI indicator to see if the line has crossed the 50 level, and gone up.
- Buy at the market or place a pending buy stop order 2-3 pips above the high of the candlestick that coincides with the ema crossing.
- Place your stop loss below the low of the previous candlestick.
- Set a 10 pips profit target.
Advantages of The 10 Pips A Day Strategy
- Really simple ema cross over forex trading strategy with the use of RSI indicator to measure the strength of a trend to get into trading.
- 10 pips profit target is a relatively easy profit target to hit in a strong trending market
- Once you’ve hit your 10 pips profit for the day, you stop trading.
Disadvantages of the 10 Pips A Day Strategy
- You can miss out on bigger profits because you are only setting a 10 pips profit target.
- You may have very short stop loss distances on some occasions and you can get stopped out easily.
- Risk to reward ratio of this system is not good.
- Potential for revenge trading: if you keep losing but your mind is so focused on getting the 10 pips profit for that day that you keep trading more and this can lead to losing a lot of money on your trading account.
Is it Possible To Make 10 Pips A Day With This System And Become Rich?
The short answer is no. The name of the forex trading system may be misleading, but it is not possible to make 10 pips a day, every single day.
Why? Because you do not control price: it will go where it wants to go depending on supply and demand. Some forex traders have this crazy idea that if they can make 10 pips a day, then they can make a lot of money when you put the power of compounding into play in forex trading you can become a forex millionaire overnight. The reality is that it does not work that way at all.
But why 10 pips a day? Well, the truth is, 10 pips a day is easily achievable. It is easy to make 10 pips a day. So what is or what are the problems then? Well, here’s a few that I can think off:
- How much are you going to risk to make only 10 pips a day? Are you risking 30 or 40 pips in a trade to make 10 pips a day?
- Are you really going to be TRULY satisfied with only 10 pips a day? Would you stop trading as soon as you hit 10 pips profit for the day?
- Some currency pairs have huge spreads… If you set a stop loss of 10 pips and a take profit target of 10 pips for each trade, you can easily get stopped out.
- What happens if every trade you placed during that day was a loser?
- What if you placed 10 trades and you lost 10 pips in all of them… 100 pips total loss for the day. Do you still keep trading???
- Do you keep trading until you wipe all your trading losses for the day and make 10 pips profit for the day? Wouldn’t you be over-trading then?