A forex pip can be defined as an extremely small degree of change in a currency pair found in the forex market. Pips are usually measured in terms of the quote currency or the base currency. Just as there are standard unite for measuring length, volume, etc, the standard unit for measuring change in the price of a currency pair being traded is known as pip. In the US dollar for instance, it is 0.0001; pips of most other currency pairs are derived based on this. The standardized point of a forex pip helps forex traders in the avoidance of huge losses while trading.
10 pips forex strategy is majorly based on a quick win in an everyday scenario. The name; 10 pips forex strategy, means to make a profit of 10 pips within a very short period of time. In most cases, these 10 pips can be gotten per day in the forex market. This trading strategy goes along with a large stop loss which is seen as being larger in evaluation to the normal income potential from each and every set up. Most forex traders like this 10 pip trading strategy because it produces rapid wins and has high win rates. It has shown to have a series of winning trades.
ADVANTAGES OF THE 10 PIPS FOREX TRADING STRATEGY
1. It can be used for every form of forex trader including beginners and experts. It is easy to learn and set up.
2. It can function in strong trending forex market.
3. It has a profit goal which is very high; that is all things being equal. This target is easily achieved compared to other forms of forex trading strategy like the 50 pips trading strategy.
DISADVANTAGES OF 10 PIPS FOREX TRADING STRATEGY
1. IT HAS A HIGH LEVEL OF RISK TO REWARD RATIO
The fact that the main aim of 10 pips forex trading strategy is to maximize win rates makes it vulnerable to a high risk amount of pips for a moderately small gain. Taking for example a 10 pips yield profit and a 95 pips stop loss trading strategy. In order for a forex trader to be successful with this strategy, he would have to invest in 95 percent of the time which actually means that out of all the 100 percent of the trade, the trader must have to make 95 percent turn to profit. It is usually seen as an impracticable high win rate.
2. UNREALISTIC TRADE EXPECTATION
A trader that uses a 10 pips forex trading strategy means that he is using a fixed amount of pips within a short and precise period in time. This strategy is said to be a disaster waiting to happen. This reason is because the forex market moves on its own will. Every market fluctuation is unique in nature.
In conclusion, when trading forex, there is nothing wrong in having a good feeling because of huge wins. However, everything becomes wrong when the sole purpose of trading is based on the fact that it gives a winning feeling. Becoming a success in forex trading isn’t all about winning at all times, its mostly about becoming a consistent and profitable trader.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.