“How Many Pips Per Day?”

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The article will seek to answer the above question and explore the best approach for using pips.

Before opening a position in a specific currency pair or commodity, index or stock, it is wise to get a custom with that pair/ derivative and learn all the factors that can influence its movements. At the smaller timeframes, the trend looks more volatile than in bigger timeframes which turns to be smoother. Based on your fundamental and technical analyses, people speculate when the markets will consider market fluctuations that affect daily pip movements and capitalise on their solid trading strategy.

HOW MANY PIPS SHOULD BE TARGETED PER DAY?

It’s not uncommon for forex traders to approach trading with the aim of collecting X many pips a day from the market. Some may even consider adopting a strategy that only makes X amount of pips per day. However, some complications arise from this approach and setting such unrealistic goals. It is recommended to go with the amount of profit instead as some pairs turn to yield different return with the same amount of pips.

Professional traders do not trade with a specific number of pips in mind. The reason is that markets do not move in a predictable manner, so a trader cannot bank on a targeted number of pips per trade.

The number of pips per day varies depending on the strategy adopted as well as the unique goals set by the individual. Some strategies target smaller, more frequent profits over multiple trades (scalping), whilst others look for large profit-taking opportunities with longer time horizons (position trading).

Hence instead of targeting X amount of pips per day, forex traders should focus on diligently following a set strategy and restrict trading with limited leverage as statistics show a higher positive return over time. (Please as for comprehensive statistical research from the time)

UNREALISTIC EXPECTATIONS OF SETTING A DAILY PIP TARGET

Traders must accept that not all trades will yield positive returns. Therefore, trying to achieve a daily pip goal is setting up for failure. A daily pip target is ineffective because it encourages trading more when the strategy is not effective and trading less during times when the strategy is more effective. This is the opposite of what we should be trying to achieve.

For example, if a trader places quick trades in the morning and hits a specified “pip goal,” the trader forgoes potential additional trades that could occur during ideal market conditions. Each strategy has its ideal market conditions; thus, this trader would ultimately be limiting what the strategy could do for them.

The chart below shows a typical example of forgone returns in unfavourable market conditions. The EUR/USD chart shows a trader targeting 20 pips per trade on a moving average (MA) price crossover trading strategy as highlighted by the circles, which indicate entry points. When the price crosses above the MA, the trader looks to buy and when the price crosses below the MA line, this signals a short entry. The red circles show trades that would have been unsuccessful following the strategy, whilst the green circles show successful trades with 20 pip movements in the direction of the trade. This example illustrates a typical example of a trader targeting ‘x’ amount of pips in adverse conditions, leading to revenge trading and losing trades.

Example: EUR/USD unfavourable market conditions

FOCUS ON WHAT IS IMPORTANT: A WINNING STRATEGY

Rather than focusing on earning a specific number of pips per day, traders need to focus on what can be controlled. In trading terms, this relates to following a strategy perfectly, with no emotion or hesitation. Once a strategy has been formulated, the most crucial step is the execution of the strategy itself.

Traders need to stick to a plan by not getting overconfident when successful and not shy away from placing the next trade when losing. Focusing on the strategy allows traders to stay away from revenge trading. Revenge trading is a natural friend to targeting a certain number of pips each day. This is because when traders are behind on a goal, this can lead to overtrading to “make it up.” That overtrading typically leads to more and more losses. If the trader has confidence in the strategy; winning or losing each trade doesn’t matter. Traders must avoid revenge trading or adjusting trade sizes to recoup losses.

PIPS VS PROFITABLE TRADING

Going after a certain number of pips per day sounds like a good plan when trading forex, but it is an unrealistic goal. The market conditions change frequently, forcing your strategy in and out of its ideal state without notice. What is needed are goals for factors that can be controlled, like following a strategy and executing it flawlessly. It is recommended to start with a risk-free demo account that has real-time pricing data.

The MaNe IDR team is available to provide the required education needed to increase your success rate, starting from learning the wording to reasons affecting trading, indicators, types of analysis, set up your own strategy and much more.