Justin Bennett is a Forex trader, coach and forex of Daily Price Action. He began trading strategy and ETFs in and later transitioned to Forex in His "aha" moment came in when he discovered the simple yet profitable technical patterns he teaches today. Justin has now taught more than 1, students from 53 countries in the Daily Price Action course and community. Follow JustinBennettFX Recent Articles. There is a lot of talk in the world of Forex, and has been for some time, about the 10 pips a day strategy. The lure of the strategy is the perception that making 10 pips a day can accumulate into great fortunes in a relatively short period of time. This sounds simple enough, and in theory it should be. Most of the strategies out there that aim for strategy small number of pips each day also carry with them a large stop loss. At least large in comparison to the nominal profit potential from each setup. This strategy is no exception. Most of the strategies that aim for 10 pips a day use a 90 pip stop loss or greater. I have even seen some as large as pips; to achieve just 10 pips of profit. They take on huge risk for little reward in exchange for a high win rate. Many traders like the idea of strategies like this because they produce quick wins and promise high win rates. As we all know, it feels pip to win. Think about how you pip after your last winning trade. Or better yet, a series of winning trades. You strategy in the work to find a favorable setup which resulted in a profit. However there is something wrong when you choose pip strategy simply because it induces a winning feeling more often than not. The logical side of your brain wants a trading strategy that will grow your trading account. This involves risking a large amount of pips strategy a relatively small gain. Think about it this way. So for ten days of trading, you have made pips. At the end of those ten days you feel unstoppable. Your stop loss is hit for a 90 pip loss. So after eleven days of trading, you have 10 pips of profit. The unfavorable risk to reward ratio brings us to the next reason why the 10 pips a day strategy is dangerous — unrealistic expectations. You can quote me on that. The market moves on its own schedule. Every week is unique, just as every day, hour and minute is unique. To become a consistently profitable Forex trader you have to learn to take what the market gives you. That might mean not trading for a day or even a week. To say that a market is going to move in a way that will produce 10 pips of profit each and every day is completely unrealistic. This can be used for any trading strategy out there. In order to do this, you will need to use two metrics to track your performance. The first metric should be your percentage gain. This will be the amount you aim for each month. This is a realistic expectation and has real value. If you simply aim for pips per month, for example, who knows how much each pip is worth. By using a percentage gain you are establishing a performance target with real value. The second metric needs to account for risk. What is that, you ask? You simple take your profit target in pips and divide it by your stop loss in pips. For example a pip target with a pip stop loss would be 3R. Therefore the goal for your second metric would be to maintain an average 2R minimum for the month. This forces you to look for favorable trade setups where the potential reward is at least twice the risk. There you have it. At least not the root of the problem. The other problem is risking nine times the potential reward. Becoming consistently pip is all about putting yourself in favorable positions to make money. A trade setup where a loss is nine times greater than the potential reward is the opposite of favorable. You may say this is all just my opinion. And you would be correct. But when was the last time you heard a professional Forex trader say they were done for the day because they hit their 10 pip goal? For the longer-term trades, especially when multiple leg option structures are involved and some capital may have to be employed, I look for a profit to loss ratio of at least five to one. Or that price action is the only viable trading strategy. Dare I say impossible? Do you think the approach to setting performance targets discussed in this article will be helpful in your trading? Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Daily Price Action, its employees, directors or fellow members. Futures, options, and spot currency trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree forex leverage can work against you as well as for forex. You must be aware of the risks of investing in forex, futures, and options and be willing to pip them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do forex trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that strategy past performance of any trading system or methodology is not necessarily indicative of future results. Private Trading Community Login Sign up for a lifetime membership. Learn to Love Cash: Mastering the Art of Patience. The 5-Step Blueprint for Navigating the Forex Market Successfully. But 10 pips a day should be easy, right? What is the 10 Pips a Day Forex Strategy? And therein lies the problem. The Attraction Many traders like the idea of strategies like this because they produce quick wins and promise high win rates. Unrealistic Expectations The unfavorable risk to reward ratio brings us to the next reason why the 10 pips a day strategy is dangerous — unrealistic expectations. So why expect the same amount of profit each and every day? Share your experience forex ask a question in the comments section below. Copyright by Daily Price Action, LLC.
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