The foreign exchange market is the most liquid market in the world. The average spread on major currency pairs is around 100 pips. However, as an ordinary trader, it is impractical to get 100 points a day, so there are 10-point strategies, 20-point strategies, 30-point strategies and 50-point strategies, which are much more reliable than 100-point strategies. We have introduced the 10-point strategy every day before, and today we will discuss the 20-point strategy.
What is the 20 point strategy?
The strategy is very simple and clear, and the basic logic is: when the price breaks through the price within the logical range, you must go long; when the price falls below the price within the logical range, you must short. Therefore, this strategy is basically characterized as a breakthrough strategy. However, it's not as simple as it sounds. There are a few criteria that must be considered before trading this strategy.
You can trade this strategy on any currency pair. However, it is recommended to focus mainly on major and minor currency pairs.
Although the market is open 24 hours, in order to ensure the effectiveness of the strategy, it is recommended to only trade when there is high liquidity . That said, trading during the London-New York overlap is the best time to apply this strategy. The liquidity of Asian market trading hours is slightly poor, and there is no market outbreak, so it is not suitable for this strategy.
Time frames play an important role when trading such strategies. To earn 20 points per day, it is best to trade the market between 1 hour and 15 minutes.
This strategy does not require any technical indicators.
❁ How to Trade the 20-Pip Strategy
1. Open the market chart of any currency pair (preferably a major or minor currency pair).
2. First, go to the 1-hour timeframe in the chart and see if the market is in a logical area to buy or sell (eg: support and resistance levels).
3. If yes, wait for the price to break through the consolidation zone or high point.
4. Confirm the breakthrough strength in a small period (15 minutes), and prepare to buy or sell according to the strength.
❁ Trade 20 pip strategy on live chart
• Multi order example
Below is the AUDUSD chart on the 1-hour timeframe . We can see that the market bounced off the purple line. Therefore, this becomes the logical area for making orders. Currently, the market is at the purple support line, and the range is very small, only ten points. To apply the 20-point strategy, the market needs to break out of this range.
In the chart below, we can see that the market broke out of the range of a large green candle. However, we will have to switch to a smaller time frame and see if the momentum to break out of this range is strong before reaching a buy price.In the 15-minute
chart below , we can clearly see two green candles breaking out of the range. This shows that the momentum of the buyers is strong, so we can go long.
Take profit and stop loss: Take profit is of course 20 points, and stop loss can be kept a few points below the support area. Alternatively, you can even keep a 1:1 RR (Risk Ratio) stop.
• Example of an empty order
Note that this strategy can also be applied when the market is trending. Below is the 1-hour chart of EUR/USD and we can see that the market is in a downtrend. The market keeps making lower lows and lower highs. At the moment it can be seen that the market is pulling back with a green candle. And all we need is for the price to break below the correction to remind us that there is room to the downside.
In the chart below, we can see that the market broke below the correction zone. Therefore, we go short after confirming the strength of the trend in the small cycle range.
In the 15-minute timeframe below , we can see that the momentum of the candle during the breakout was strong enough. Therefore, it is time to consider shorting.
As far as Take Profit and Stop Loss are concerned, it is the same as the previous example. In other words, 20 points for profit and 20 points for stop loss.
The applicability of this strategy is that it can be used in any market state. However, all of the above conditions must be met if the strategy is to maximize its returns. If you are a beginning trader, this might be the ideal strategy to get started. If you have trading experience, you can try to enhance the effectiveness and applicability of your strategy by applying some indicators and patterns.
Also, this strategy does not provide 100% accuracy. When any strategy fails, don't be superstitious, so it is recommended to use this strategy in combination with other strategies to get a better probability of winning. Happy trading!