• Stock Investing Blog
• Trading Options
• Forex Trading
• Options Trading
• Stock Market Basics
• Fund Information
• Investor Definitions
• Stock Market Forums

• Stephen Cooper
• Easyonlinepaydayloan

Home >> Stock Forums >> Day trading strategy for 10 pips per trade

Day trading strategy for 10 pips per trade

lil dickie said: "I have often wondered if small times could do well day trading small amounts on Forex. I found this [url=http://www.fxstreet.com/fundamental/analysis-reports/lessons-from-the-pros/2007-08-08.html]Q&A with Ed Ponsi[/url] where the question is answered. [quote] Q) Good day Ed, I would like to know what risk to reward ratio do you recommend for a person who day trades only for 10 pips per trade Ed Ponsi) I don't recommend trading for 10 pips per trade, partly because there is no risk-reward scenario that can play out favorably under these circumstances. For example, if you risk one pip for every two pips of potential reward (usually the minimum acceptable ratio of risk to reward), you would be forced to use a stop of only 5 pips. Since you must pay the spread (usually 3 pips) upon entry of the trade, your stop will be hit if the trade moves just two pips against you. It's hard to imagine any scenario where this wouldn't result in a losing trade - in a sense, by shrinking the 'playing field', you are making the spread a huge part of your trade. Even the use of a 1:1 (one pip of risk per one pip of potential gain) risk-reward ratio presents a very negative scenario, since you will need a 13-pip positive excursion (10 pips plus the spread of 3 pips) to earn your 10-pip reward, while a negative excursion of just 7 pips (10 pips plus the spread of 3 pips) will result in an equivalent loss. Since 13 is nearly twice as many pips as 7, it will be nearly twice as difficult to win 10 pips as it is to lose 10 pips under this scenario. You could say the odds of success are nearly two-to-one against this trader. My advice is, don't trade for 10 pips - it may sound conservative, but there is nothing conservative about playing a game in which the odds are stacked nearly two-to-one against you. Instead, trade for larger gains with wider stops; this helps to neutralize the spread, and also allows traders to risk considerably less than their potential reward without creating lopsided trading odds. [/quote] So it seems he is saying you need to play for higher stakes than that."

sjerar said: "[QUOTE=lil dickie]I have often wondered if small times could do well day trading small amounts on Forex. So it seems he is saying you need to play for higher stakes than that.[/QUOTE] Everything depends on the pair you trade USD/CHF is very good tradable with 10 pip TP"