![10 Pips A Day Compounding |[Pros & Cons]](https://fxtradinger.com/wp-content/uploads/2022/02/10-Pips-Day-Compounding-1200x385.jpeg)
As the name implies the goal of this strategy is to take profit after 10 pips each day. Theoretically, it sounds simple. Practically it’s not as easy as it sounds.
The only thing that makes many strategies a big flop is when you try to use a stop loss at 90 pips or greater. Without a proper risk-reward ratio it is impossible to make a profit from 10 pips a day strategy.
Let’s discuss this in detail here.
10 pips a day compounding is a forex strategy. In this strategy, the trader stops trading when he hits 10 pips profit of the day. The next day, he again strives for 10 pip profit and stops trading. This goes on and he daily compounds his trades with 10 pips profit. He never tries to cross this 10 pip profit limit.
This idea is good for traders who want quick wins. But remember the feeling behind adopting any strategy should never be to enjoy the feeling of winning. Learning from loss is also a part of forex.
10 Pips a Day Compounding Forex Trading Strategy
In the forex market, many pairs have the ability to travel more than 100 pips per day. Not every trader is efficient enough to capture all these moments. They are able to capture only a part of the price move according to their trading strategy and time frame.
In this strategy, trades reopened only when the price range is 10 pips by applying 200 simple moving average indicators. If by applying this indicator, the price is not in the range of 10 pips trade will not be opened.
Time Frame For 10 pips a day compounding Strategy
This strategy is applied to charts with a shorter time frame. For both 1 hr and 15 minutes charts, traders will use 100 to 200 simple moving average indicators SMA to predict the trend.
- 15-minute chart
- 1-hour chart
Indicators Required For 10 Pips a Day Compounding strategy
You only need 2 Indicators, but if you want to add the 3rd one you can surely go with it:
- 100SMA indicator
- 200 SMA Indicator
- RSI
When To Set Up Buy Trade For 10 Pips a Day Compounding
To set the buy signal, make sure the market is bullish with the uptrend. To confirm the trend use 1 hr and 15 min time frame charts. To setup buy trade note the points below:
- When the price reaches 10 pips range above the 200 simple moving average indicators, open the buy trade
- Price range 10 pip above the SMA indicator signifies uptrend and bullish market
- Put the stop loss 10 to 20 pips below the SMA indicator
- You can adjust or trail the stop loss according to your trading style and risk management strategies.
- You can also set the buy trade when the price hits the 100 SMA indicator. However, make sure never set it too far from 200 EMA
When To Set Sell Trade For 10 Pips a Day Compounding
To set the buy signal, make sure the market is bearish with the downtrend. To confirm the trend use 1 hr and 15 min time frame charts. To set up sell trade, note the points below:
- When the price reaches 10 pips range below the 200 simple moving average indicators, open the buy trade
- Price range 10 pip below the SMA indicator signifies downtrend and bearish market
- Put the stop loss 10 to 20 pips above the SMA indicator
- You can adjust or trail the stop loss according to your trading style and risk management strategies.
- Price can reject from this level as well. The reason is that many traders get into the trade at this level and the price fails to break out. You can also call such levels minor resistance and support levels on different time frame charts. It is better to use TP here.
When To Set Take Profit in 10 pips a Day Compounding Strategy
As we wrote earlier, the price can bounce at a certain level in the strategy and trends can reverse. So the best position to take profit in this strategy is between 50 to 60 pips from 200 SMA indicators. Stick to it and enjoy the profit.
Pros of 10 Pips a Day Compounding Strategy
There are some benefits of this strategy. However, we can’t say that every strategy is perfect. It depends on your trading psychology and style how you benefit from outcomes of certain strategies:
- It’s pretty simple with SMA
- Shorter time frames help to take a quick move
- You stop after 10 pips
Cons of 10 Pips a Day Compounding strategy
There are some drawbacks of this strategy as well. With small account holders, it would not do a miracle. For big accounts of more than $25k, it works exceptionally well. Let’s look at some major key points here:
- No big profit expectation as you’re setting 10 pip profit only
- Stop loss may be very short in some pairs
- Easily prone to overtrade to pursue 10 pips
Best Currency Pairs to be Traded with 10 pips a Day Compounding
For this strategy choose currency pairs with a low spread to 1 to 2 pips. Below are a few chosen pairs on which this strategy works well:
- PURSUED,
- GBPUSD,
- USDCHF,
- USDJPY,
Can 10 pips a day compounding strategy make you rich?
If you are thinking that 10 pips a day can make you a millionaire, you know less about forex.
The reality is that – No, 10 pips a day can’t make you rich as the forex market is unpredictable. You can’t control price moves. You can only speculate and make your analysis on the basis of charts and indicators. But it’s impossible to make 10 pips every day.
Not every trader is able to capture 10 pips every day. Price is controlled by the supply and demand chain and no one knows when it falls and when it rises.
We can only make rough guesses. Nothing is confirmed. One more question is that if you are risking more on making 100 pips a day how can you become a millionaire
If your emotions dominate you, will you ever stop trading after 10 pips? Can you guarantee your overtrading spirit is under control?
Frequently Asked Questions
Is 10 pips a day good?
It is possible to have 10 pips a day but professional traders do not recommend it. If you want to take profit after 10 pips, you will have to risk 10 pips also. In this attempt, you can miss a lot of profitable trade opportunities. It can also wipe off your capital soon if you don’t manage risk properly. It’s good to have 5 to 8 pips daily with a smaller lot size.
How can I get 10 pips in one day?
The only way to get 10 pips a day is 10 pips a day compounding strategy. This strategy implies taking profit after every 10 pips and stopping trading. It is possible though risky.
How many points are 10 pips?
In Meta Trader, points and pips confuse traders a lot. Here 10 points=1pips, similarly 100points=10pips. As trade moves, it multiplies money with points, not pips. Its bit complicated math
Download editable 10 pips/trade excel spreadsheet
Final Verdict
After considering your account balance and trading style you can adopt this strategy. But never forget to read the pros and cons of this strategy. It is wrong to think that this strategy can make you a millionaire. However, if you stick to some strategy with proper risk management and market analysis, you can surely earn a handsome profit. It’s possible only if you can guarantee your emotions and stop your overtrading spirit.
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