About once a week I receive an email from an aspiring Forex trader telling me that part of their trading plan is collecting a consistent pips a day from the market. Or they might just ask me flat out for a strategy that only makes pips a day. There is a glaring problem in thinking of trading in this way.
The problem with setting a goal of X amount of pips per day is that the market changes every day and no strategy will be that consistent. We must accept the fact that we will have losing trades, losing days So trying to achieve this type of daily goal is setting ourselves up for failure before we even place our first trade.
Another problem this type of goal produces is that it encourages trading more during times when our strategy is not effective and less during times when our strategy is more effective. If our first couple of trades are losing trades, we then will need to place more trades to dig ourselves out of a hole before hitting our profit target for the day. The problem is, if market conditions are not right for our strategy, we are forced to continue trading and place more trades which could result in greater losses.
So what can we control? We can control our actions; meaning we can follow our strategy perfectly, with no emotion or hesitation. Once we have developed a winning strategy , the last step is execution of the strategy itself. We need to stick to our plan by not getting overconfident when we are winning and to not shy away from placing the next trade when we are losing. Money management is included in that as well. We want to avoid revenge trading, or adjusting our trade size in an attempt to recoup losses.
We also want to avoid increasing our trade size just because we have had a good run and feel more confident. There is a reason why we have decided to trade the trade size we are trading to begin with, so stick to it. The best part of trading with an edge is that over time, we should expect to be profitable. After we are following our strategy diligently and are confident we have an edge, the final ingredient is time. Markets are not consistent and neither will your day-to-day results be.
We need time for the odds to play out in our favor. EVERY trader will have losing streaks. It is not the fault of the trader or the strategy, but part of working in this field. Again, the only thing we can control is the actual execution of our trading plan. Time and the market will do the rest. Going after a certain number of pips per day sounds like a good plan when we first start out Forex trading, but it is an unobtainable goal.
The market is not consistent enough to pull out consistent profits day in and day out. What we need are goals for things we can control, like following our strategy and executing it flawlessly. If you are interested in learning how to trade this market, start off with a risk-free demo account that has real-time pricing data. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Click here to dismiss.
Targeting X amount of pips per day is unrealistic. We should instead focus on diligently following our strategy. Trading with an edge using limited leverage should yield a profit over time. Foundations of Technical Analysis: Classic Chart Patterns, Part I. Upcoming Events Economic Event. Forex Economic Calendar A:More...