What is the 5 Pip Scalping Strategy?
A vast number of Forex traders use the 5 pip scalping strategy nowadays. And it's no wonder because this strategy can bring decent income to your trading account in the long term if you know how to apply it correctly. It is important if you want to start Forex trading in 2022, or if you want to become more successful in currency trading.
Those who trade currencies on a regular basis usually make about five pips a day - and even more sometimes. What about those who have never traded before? Well, if they follow some key steps and sound money management skills then yes.
It might not seem like much but you can still make one to three dollars worth of profit from it every day; which adds up eventually. Some people end up making upwards of one hundred to three hundred dollars in one single trading session, read the following guide and find out all the positives and negatives of the 5 pip scalping strategy, one of the most effective strategies around.
5 Pip Scalping Strategy: A Basic Breakdown
- First, you need to keep your emotions at bay while trading.
You can never predict the future with 100% accuracy - stay grounded and create a strategy, then stick with it.
- Secondly, learn how to trade properly and make sure you know what software you're using - whether it's MT4, MT5, or C-Trader. Try them all.
- Thirdly, make sure you have a solid trading plan so that things go smoothly.
This strategy will work with any pairing; but if you want the best results, I recommend trading Euro/US Dollars. There are many reasons why the Euro/US Dollar is great for these trades, such as it usually has a smaller spread than other pairs, so your profits are higher quicker than using other strategies that might take up to two or three times longer before making a profit because of larger spreads.
Another reason is that because Euro/US Dollar trades don't tend to change quickly or dramatically in value - unlike say a pairing like GBP/USD - there's less risk involved when entering into trades that might only make 5 pips before going back down.
As a rule, trading within high-volume periods and avoiding trades before major news releases have always been advised. What would happen if you took it to the next level?
Limiting it down to only the first hour of London trading (3 am Eastern Time) or only two hours after the US market opens (9-11 am Eastern Time), can produce satisfying results.
You won't always win because of these winning hours, but it's worth giving them a try for an hour or two before giving up. You might end up getting some profitable trades within these time slots; and if you don't, at least you'll have some new strategies to work on the next time.
Besides that, there aren't any limitations to the trade. You just need to stay at +5 until the next trade takes place. Besides those days where EUR/USD is trending heavily in one direction, you usually have enough trades in any two-hour window of time for it to reach your goal of 20 points a day.
5 Pip Scalping Strategy: The Rules are easy to follow:
- Trade the EUR/USD in 1-minute intervals;
- Apply the OsMA Indicator to your graphs, utilizing the"12,26,9" settings
- For Buy exchanges, enter when the primary OsMA bar closes ABOVE the"0" line
- For Sell exchanges, enter when the main OsMA bar closes BELOW the"0" line'
- Leave when you see 5 pips benefit.
Advantages of the 5 pip scalping strategy
You don't need to be an expert at forex trading to take advantage of this powerful, easy-to-use technique. As long as you love trends, everything will work out great! Just set your desired amount (let's say five pips) and go for it.
In no time at all, you'll hit that goal without a hitch, and if something comes up where there's some confusion - just do a quick search on five pips a day myfxbook and you'll find many strategies designed around this system.
Disadvantages of the 5 pip scalping strategy
This 5 pip per day strategy doesn't perform well in choppy markets. Trading in pairs such as GBP/NZD or NZD/CAD will keep you from profiting with this technique.
Rather than trading every day, focus on a small number of pairs where spreads are low such as EUR/USD or USD/JPY - because the opportunities for winning trades go up exponentially at these times.
If you're prone to over-trading, then stay away! This strategy relies heavily on multiple quick entries and exits during any given trading period. And please be picky when choosing trades - only enter when you feel confident about doing so.
Do not invest your money too quickly. Practicing before you even think about investing is always a good idea. This strategy may not work well with you either, so don't despair. If you don't think of 2-5 pips each day as an accomplishment, then maybe it isn't right for you either.
What number of pips is a day decent?
On average, major forex currency pairs move around 70-80 pips per day. It is possible for a retail trader to get this much profit in one day. Though there are some strategies like 110 pips a day online, it isn't easy to make this much profit every day. One can only hope for 30-40 pips each trading session.
How much is 1 pip worth?
When you multiply a pip by the size of a contract, you find out how much money it is worth.
A mini lot has 10,000 units and standard lots have 100,000 units. For example, GBP/USD stands for Great Britain Pounds to US Dollars. If one pip moves in a USD (standard) contract then it will be worth $10.