5 pips a day can't make a living.. or can it?

Beginner Questions
1

I understand that a new trader needs to learn a lot about forex and get months of experience on demo accounts, but I think any person with average IQ can eventually make a consistent profit of 5 pip a day (or 25 pips a week).
Now if I can be 99% sure that I will make [I]at least[/I] 5 pips a day for the next few decades, I would go for it.
Think about it: you open an account with just 2000$ and 200:1 leverage. Trade with 200k size lots, which, although, is half of your account size, is not as risky as it seems at first because to get 5 pips a day, we are trading 1 or 5-minute charts, very quick trades. Meaning that our stop-losses are not that far away (5-10 pips). And if we have the trading experience we can often predict with 99% certainty, using indicators like MACD, Sotchastics and RSI, that the price will move a certain way. We don’t know when or how much it will move but we can tell with confidence that, for example, when a pair is at 80 RSI, and at the ceiling of stochastics, it will go down soon. It works best on 1 minute charts. (I am currently testing this out on a demo account, and I was able to make several little trades all around 3-8 pips profit, but the beauty of it is that I never made a losing trade so far and when I do, the loss will be only around 10 pips)
Anyways, as I was saying, in my opinion, 5 pips a day doesn’t take a genius, just a willing and experienced trader. 5 pips trade with 200k lot size on 200:1 leverage is 100$ profit. I admit it isn’t much but it will pay the rent and food. I lived on minimum wage before and I was fine… Now I still work at a dead-end job for 13$/hour but my excuse is: I am only 19 :slight_smile: And that is the reason I am learning to be a trader so I can some day make living by doing what I like.
In conclusion, my main point of this thread is to express my opinions that:

  1. Consistency is the most important goal any trader should focus on. If you can be at least 95% consistent on monthly basis, it won’t matter much how many pips you can make. You can make huge profits with even 1 pip a day with a good initial investment and high leverage. Consistent 5 pips a day is hard at first, but far from impossible if you focus on your goal
  2. If you achieve the 5 pips a day goal, and have a couple thousand cash, you CAN start trading real money and quit your job if you hate it. Now I realize that 100$ a day is not satisfying for most people but that is just a 2000$ investment. Make your initial investment larger for bigger daily profits.
2

You will quickly discover how wrong this statment is. With the high transaction costs involved in such a strategy I believe your chances of success to be nil. To make 5 pips profit with a 10 pip stop you are going to have to have the trade move 5 pips plus spread in your direction before it goes 10 against you. Your return then on a successful trade will be 0.5R. You will need 2/3 of your trades to do this just to break even. If you could predict even at this level you would be doing better than most traders. In fact if anything gave you a 99% chance of correct prediction (where on earth did you get that figure from) you would in fact bet your house.

3

By 99% I just meant “most of the time”. And even if in reality it’s impossible to get 99% winning trades, I think something like 90% or even 80% is totally possible.

4

Risking $200 per trade on a $2000 account is borderline account suicide. When you hit a losing streak (and you will) half of your money will be gone in a few trades. I’d stick to 2-3% risk, not 10%

Apart from that, your math is flawed. You have no basis for saying this system wins 99% of the time since you’ve only made a few trades. 99%, or any other number, is just a guess. If you’re making 5 pips with a 10 pip stoploss then you’ll need a 66% win rate just to break even. So even if you achieved a 70% win rate (you won’t get anything above that with this type of system), you’d barely be making any money.

If you want to be a successful forex trader then my advice would be to find one of the systems/methods here on Babypips that are used by successful forex traders. You will not find one successful trader on here using that type of system, and there’s a reason for that. :slight_smile:

5

Read this…(hyperlink)…

http://www.tradinggame.com.au/articles/article.asp?i=6

6

Lakontis
Can I make a suggestion? Revise your plan a little. How about 10 pips 4 to 5 times per day? Sounds like you�re feeling pretty comfortable and confident digging out 5 pip trades, try working up to the same level of comfort confidence with 7 then 10 pips. Then work up to doing it successfully 4 to 5 times per day. Here are the numbers, 2% $2000 account is $40. Stop loss needs to be no more than $40, 10 pip stop loss works out to trading $4 per pip lot size. right? (I flunked algebra so be sure to carefully check my math)

Trade $4 per pip lot size
TP at 10 pips - SL at 10 pips
winning trade = $40
losing trade = $40

With a trading strategy that gives you an edge, a pair with low speads, and a good broker, you�d be on your way with a reasonable plan with conservative money management.

If you�d like I�ll give you my 2 pips worth of advice on successfully trading 1m & 5m charts and brokers, but… I�ve got to run and do a bunch of errands so I�ll get back to you later…

7

Your link is bad, Tymen. It gives a “404 not found” error.

8

Lakontis,
Let me start by saying my thoughts are based on my experience and might be worth only what you�re paying $0. Also, I�m not and can�t give you a system, I�m only throwing out a broad generalized concept that has helped make my trading with short time frames more successful.

If you want to trade 5m and 1m charts my advice would be to pay lots of attention to support and resistance levels and less to your traditional indicators. Whether it�s on a 4h or 1m chart, forex spends most the time moving up & down between support and resistance levels and moving along trend lines and channels.

I trade short time frames 5m and 1m. (even a tick chart, but…) Why 5m 1m charts? I like trading short time frames, I like the pace, it fits with my short attention span. Is it for everyone? NO! There�s a theory that people are born with either a hunter or farmer temperament, maybe the short time frames are for the hunters and the longer for the farmers, but that�s a conversation for another day!

I suggest you trade short time frames the same way you would long, just scaled down. Where do you learn to trade longer time frames? Right here at babypips. A lot of the most popular, successful and profitable threads on babypips talk about using 4h and 1h charts to look for areas-zones of support and resistance, then dropping down to 15m charts to find entry and exit targets. I have found that the same concepts can be applied to shorter time frames. For example looking for support & resistance areas-zones on your 5m chart and entering and exiting with the 1m.

On the short time frames look for the same type of S&R levels as long, but scale them down. Instead of monthly & weekly highs & lows, look for yesterdays hi & lo, hi-lo for the last 4-hours, hi-lo for the last 1-hour. Look for the most recent prior reversals on the 15m and 5m, look for areas with lots of congestion. Big numbers 00s & 50s, fib lines and pivot points. Draw lines at the significant levels then drop down to the 1m and target your entries and exits.

When the prices get to a significant S/R area/zone, either on the 4h or 1m chart, one of two things will eventually occur. Either the price will breakout through the S/R or reverse and go back the other way. You need to be ready, know how to confirm the move, how much will it retrace, where to take profits, where to set your stops… on and on and on… And there�s more…

Start reading the S/R threads that�s where you�ll find some good stuff!

Hope this helps

General Terms & Conditions: Please keep in mind that this post was written by a dyslexic author…yes I do spell check & proof read…usually 5 or 6 times…but when the network is down or the mental circuit breakers blown…stuff still slips out with lots of typos and misspellings,

9

Just to add to the above, you might be better off learning to trade daily and 4 hour charts to start before venturing near 5m to 1m. There is so much noise on the 1 and 5min charts that if you DON’t KNOW what you’re doing, you WILL lose money. Learning S&R on higher timeframes first is beneficial.

10

Lakontis,

Buried in the middle of your post is the answer to your question:

[B]Demo trade this theory of yours, and you will find out first-hand why it won’t work.[/B]

You think you can make 5 pips per day, with 99% consistency, using extreme leverage. Okay, prove it (not to us, to YOURSELF). Starting on Monday, trade this strategy in your DEMO account, for the next 100 trading days. This little experiment will take until Halloween.

I promise you that, long before Halloween, you will learn that this strategy cannot work over the long term. But, more important, you will learn WHY is can’t work — and THAT knowledge can be applied to your trading for the rest of your career as a forex trader.

It’s so hard to abandon a pet theory, even when knowledgeable people tell you that it cannot succeed. The ancient Chinese understood this aspect of human frailty, and they have passed down to us a proverb which expresses the learning curve that you are on:

[B]I hear, but I forget. — I see, and I remember. — I do, and then I understand.[/B]

Let us know how the experiment goes.

Clint

11

I wish you luck if you really think that this will work. Here’s the thing though. Most traders eventually experience exactly what you are thinking now. I did. After reading so many threads about 50pips a day and 900 pips a week I was like…"hmm. Why so many. If I can get a good consistency then I’ll only need small pip gains with high lot sizes and I’ll make more money quicker than any other person.

Fast forward the last 6 months and I’ve abandoned that thought. Lets just say that the lower time frame you go down the more volatile it is and the harder it is to trade. The same plan I’m using now was VERY inconsistent on lower-time frames (15min, 5min). I increased to 4h with a healthier average tp of 30 pips and I’m doing FAR better.

I have the occasional loss, but I average about 3-4 winning trades a week to 1 losing, sometimes none at all. So I come out ahead and have a great consistent system.

Now I do use lot sizes that FAR exceed 2%. Cause hay… in the beginning if I can go big and increase my account size to where I can use proper MM and still make good money, then I’m gonna do that. But that kind of risk for all trades will burn you in the end.

12

I haven’t been on Babypips for a while . But I would like to add my 2 cents here. Something like this could work , But I believe to really be successfull at it you should learn price action and not use indicators. Then if you can control greed and close with your few pips and go away you could succeed.

Study S/R on 1hr and greater charts when you approach this areas take your trade, at the least price will retrace a small amount even in a strong trend as others will be taking profit or entering trades at these levels. But if your waiting for your indicator to shift the move could be over. But for better success open your trade with multiple orders then when it moves in your direction close a portion at your target and leave the ballance open then move your stop to break even. This way if this IS a turning point you could be in the trade at the right place. making all your pips for the week at one time.

I do use a 1 minute chart at these areas to show me when the pullback has started. You can also see the price start to slow as the candles get shorter approaching the area. Anyway just some thoughts… Ken :slight_smile:

13

Let me try again…

http://www.tradinggame.com.au/articles/article.asp?i=6

Oh no!!

The link no longer works. :eek:

What a pity!!
Such a loss of good info!! :frowning:

I am only glad that I have a hard copy.
I could scan it, put it into Image shack and go from there!! :slight_smile:

14

Hi Tymen,

Even though your link doesn’t work, I did get this from the site and the interview was very interesting to me and hopefully to all on this forum:

74.125.155.132/search?q=cache:tradinggame.com.au/articles

To keep trading and “to become your own cause” as you are trading are worth doing.

Dollie

15

I know it not what forex traders or baby pips want to promote or teach
but you can live or make money of only a few pips per day, it took me 18 months to make any sort of profit out of trading most of that time was spent demo trading, trying to learn and understand the market, i certainly do not know every thing about what i do or even why my stratergy work’s, i understand enought now to make profit, i only place 1 trade per day althought i set 2 pending orders which ever one is trigered first cancells the other, my target is 10 pips per day althought i often get more(sometimes less) point being, i do not try to make 10 million pound in every trade.

trading is totally down to the individual there personality and how they want to go about it, i have tried copying other people’s stratergies,using so many indicators my screen looked like a rainbow and all the rest of it, but none of them worked for me, dosnt mean to say they dont work for other people,

im pretty sure if some people saw how i traded they would call me crazy, sometimes i often wonder myself, i have been trading live full time since xmas now, and are happy with my 10 ish pips per day and will continue with the 10 pips per day

if it works for you, **** it do it.