Posted by forex at 4:46 AM
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1. Trade from an intra-day chart. The goal of capturing 10 pips of profit per trade is suitable for a short term day-trading strategy. As such, you should use an intra-day chart to plan entries and exits for your trade. Some examples of charts to use are a 15-minute, 5-minute or even a 1-minute chart.
2. Decrease your drawdown as much as possible. Drawdown is a term describing the amount of paper losses you incur before a position turns profitable. While some drawdown is acceptable for medium- and long-term trades, you must aggressively cut your losses and eliminate drawdown when making intraday trades.Effectively, this means that you need to precisely time entries and exits on your trades. Some popular methods traders use to accomplish this goal include support and resistance levels, candlestick charting and trend lines. Many traders also incorporate indicators such as the MACD, Stochastics and RSI. No matter which strategies you use, you need to time your trades as precisely as possible and cut losses immediately when a trade moves against you.
3. Use a trailing stop loss. The trailing stop loss is an essential tool to use when making intraday trades because it automatically cuts losses and locks in profits as a trade moves in your favor. Whenever you enter a trade, enter a trailing stop loss close to your entry level. This will prevent you from ever taking a big loss in the market.
4. Exit the market when you reach your goal. In this scenario your goal is 10 pips, but you may have to make a little over 10 pips to compensate for the spread. For example, if your Forex broker offers a 2 pip spread on the EUR/USD (euro/dollar), you need to make 12 pips on a trade to achieve a 10 pip net profit. One technique for exiting trades is to move your stop loss up to lock in your profit goal rather than exiting the trade. This protects you from giving back some of your profits while allowing you to book additional profits if the market continues to move in your favor.