Every individual analyzes his or her own trading strategy. These individual strategies reflect their level of knowledge, their goals, their expectations from the investments, and much more. But these strategies can be rigid and can result in stagnant growth of the returns on investment. To gain more pips from the trading, the trader must keep up with the changing market. The strategies formulated must be made keeping in mind the proper money management and aiming for gains in the long haul.
To better describe the importance of keeping up with the changes in the Japanese term “Kaizen” which means “good changes”. Japanese believe that there must be small changes taking place every now and then in manufacturing and business. These changes must also be monitored regularly to understand their impact. If a trader regularly applies such a strategy to his or her trading, it may help in the long run.
How to get more pips in forex trading?
Traders can get more pips in forex trading only if create a trading strategy that relies on historically tested systems that contain precisely defined values for stop loss, target price, and entry position level. Small changes in a trading strategy that show profitability improvement are the perfect way to increase the number of pips and bigger profit. Of course, money management and calculated position size are important criteria for trading success.
So, the answer is- small changes. Once a trader gets familiarized with the process of inducing small changes in the trading strategy, the results will be favorable. The following are some strategies through which one can induce some pips into the training strategy.
Example of how to get more pips using small strategy changes:
- Step 1: For example, the trader creates a buy order when the hourly close price is above the daily high price level.
- Step 2: Trader set stop loss, target position based on previous support, and resistance level.
- Step 3: Now traders can test the system in the last 20 years. He can analyze data for the last 20 years and see how the strategy performs.
- Step 4: Trader makes the conclusion that his system gives the best results during the USA session and the worst results during the Asian session.
- Step 5: The trader decides to enable strategy only during the USA session and he stops trading during the Asian session.
In this case, the trader can increase the probability to get more pips during the trading. Of course, past performance does not indicate future performance but statistics is the only tool that we have to measure strategy quality.
Using Limit Orders
A trader can choose to enter into the trading system either at Market Order or at Pending Limit order. The most commonly used method is by Market Order, where the trader rushes to buy the securities at a favorable market price. Whereas, in Pending Limit Order, the trader puts a limit order lower than the market price, and the transaction is executed once the price reaches the level of the order limit.
Traders use the Market Order method with the hope that there will be an uptrend and they will start receiving the profits. But there is no surety of profits, stating that the market is a very uncertain place. One cannot be 100% sure about future profits and losses. So, it is always advisable to maintain a margin for safety. And this can be achieved by using Pending Order Limit.
Pending Order Limit uses pips to create a safe distance between the Market Price and Order Limit. The trader sets the limit approximately 4-5 pips below the market price and buys the securities when the price falls to the set limit.
This may look like a small change in the strategy. But if you look at it in the longer run, it will reflect its profit-making capabilities. The only trick is, one must know how to set the limits accurately. If a trader is trading 300 profitable trades in a year and in each trade he uses 4-5 pips (that is the profit margin), the total profit will increase by 1200 to 1500 pips in a year. Therefore, a small change of 4-5 pips resulted in a profit of 1200-1500 pips in a single year.
Stop Level Pips
One of the changes that a trader can use in the strategy is to add pips in the stop loss. Traders use stop loss while buying and selling their securities. While buying they look for the swing low price whereas while selling they look for the swing high price. But, if the trader uses last swing high and last swing low, it adds 2-3 pips to the level of stop loss.
However, the difference of just mere 2-3 pips may not assure you a favorable outcome every time. Moreover, if there are any outcomes, they may also not make a huge difference. But, by accumulating these small pips, while occurring losses, can help in reducing the loss in the future. And at some point, it may give positive returns.
A regular and careful study of the stop loss level of the past trades can help you understand the changes that need to be brought in the trading strategy. The trader may differentiate between the stop loss used by them and the stop loss that could have given him the same outcome. For example, the trader was using a stop loss at 25 pips but the study shows that he could have seen the same result at 20 pips stop. This indicates that the trader can tighten the stop loss to that level.
Using Take Profit Targets
Sometimes it is advised to always trace back at your past trades. The Past will let you know of any mistakes made by you and not repeat such mistakes again. Try to analyze the past trades and see if the profit you made was the maximum profit possible or you could have got higher than what you got. This means that the trader is playing safe by placing the take profit target very close to the expected profit price. However, it is keeping him back from making a higher possible profit.
For example, the trader is placing a target at 25 pips and making the same profit. But he can get the same win at 35 pips. So, it is important to consider the past trades and gain as many extra pips as possible.
The trading style and strategy of every individual are different. One wants to make a maximum profit while others want to play safe and targets not to lose. Taking risks and adding these small changes to your trading strategy may not only help you gain extra but also help you come out of your comfort zone. Those who have been using the same rigid strategy for a very long time, do not get to learn more than what they already know. But, those who keep up with the changing market, and apply these small changes to their reading strategy, learn new techniques every day and also become capable of taking the risk in hopes of higher profits.
However, these small changes may not be suitable or fit into every trading strategy and may not come with a huge difference. The aim is to inspect your current strategy and induce such small changes to it. These small changes may eventually result in huge differences in the future and bring a rebalance in the trading strategy.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
Education: Computer Engineering and Ph.D. in machine learning.
Igor regularly publishes trading-related videos on the Fxigor Youtube channel.
To contact Igor write on:
igor@forex.in.rs
