Forex trading is the common form of business done by most people to ensure their capital increases within the shortest time possible. Professional Forex trading becomes challenging when one is getting started with a small Forex account. This guide will try to delve into the most effective way of growing a small forex account by providing useful tips and techniques to enable you to be successful in the forex market.
Most brand-new day traders do not have a lot of money to trade with and wish to see their forex accounts growing fast. Unfortunately, most will not have the capital to open a substantial forex account, and hence, even if they do, there are very high chances of them blowing it all.
The Moving Average is a YouTube channel focused on day trading. It provides insight and strategies for traders to get an appropriate track for consistent profitability. In this video, Artie, the host of the channel, is discussing his personal aggressive way of growing a small Forex account with the core focus on risk management and strategic planning.
How to Grow a Small Forex Account – High Risk; High Reward: The following article is on the 20-pip challenge strategy, a high-risk way to grow a small forex account. With this method, traders who apply it stand a chance of converting their small investments into significant rewards if they play by the rules and apply proper risk management.
What Is The 20-Pip Challenge?
20 PIP CHALLENGE is a unique way of placing orders to grow a small FOREX fund quickly. The concept is simple: try to make twenty pips per trade, growing the account by 30% following the previous successful trade. This method needs to be carried out in a very precise manner.
Why the 20-Pip Challenge Works
- Small Initial Investment: You can start with as little as $20 under this strategy, thus making it accessible if, in your case, you have a smaller capital.
- Compounded Gains: With a target of 30% growth every trade, the account balance compounds very quickly, making it possible to grow into substantial sums of capital with just a few trades.
- Scalable: This means that if the account balance grows, then lot sizes and potential returns proportionally grow with it.
Forex Market Dynamics
Before one proceeds to put the strategy in place, something comes first; it is understanding the ebb and the flow of the forex market. This market can move fiercely in currency pairs like GBP/JPY in different directions, up and down. Those provide with an avenue to catch 20 pips constantly if you are able to read the signs.
Key Market Characteristics
- Volatility: The really quick changes in prices could result in either high gains or large losses.
- Noisy: Over a one-minute timeframe, the market can appear noisy now and might be giving a wrong signal many times.
- News-based Events: Economic news releases may develop sudden spurts and plunges within a market, which are generally unpredictable.
4 Steps On Implementing the 20-Pip Challenge
Step 1: Trading Platform Setup
- Pick the Right Broker: Make sure your broker offers low spreads and quick execution to enable you to get the most from trading.
- Use TradingView: It is a detailed charting platform that provides the tools needed to analyze market moves and place trades.
Step 2: Define Your Strategy
- Focus on a Particular Currency Pair: You could begin with a very volatile pair such as GBP/JPY to have a higher probability of hitting the target by getting those 20 pips.
- Set Up Indicators: Use the following moving averages to spot a trend and even the opportunity for market entry: 21, 50, and 200-period.
- Key Patterns: It is three candles in the same direction followed by a very large engulfing candle in the other direction. This three-line strike pattern is one of the most key forms of identification for entry.
Step 3: Execute Trades
- Enter Trades Based on the Pattern: Once you identify the three-line strike, enter the trade below or above the engulfing candle with a very tight stop loss.
- Set Your Profit Objective: Aim for a 20-profit trade.
- Control Risk: Always trade with the appropriate lot size, so you are only risking a small percentage of your account on any one trade.
Step 4: Monitor and Adjust
- Trade Journal: Record each trade. You need to write down the entry and exit points, used indicators, and reasons also. This way you can notice what works and what doesn’t.
- Adjust the Strategy as Needed: Be flexible and adjust your strategy as per the insights obtained from your trading journal and the changing market conditions.
Risk Management
Even though the 20-pip challenge is aggressive, building in strong components of risk management is also important.
Key Principles of Risk Management
- Never Risk More Than You Can Afford to Lose: Treat your initial investment as a sunk cost and avoid putting at risk more than you can comfortably afford to lose.
- Use Tight Stop Losses: Minimize potential losses by using tight stop losses just above or below your entry points.
- Avoid Overtrading: Stick to a strategy and avoid getting into trades without the right confluence.
Psychological Aspects of Trading
Trading psychology is huge in the success of this strategy. Through emotional discipline, one can bypass typical pitfalls such as revenge trading and overconfidence.
Tips for Maintaining Emotional Discipline
- Stay Detached: Keep your emotions away from any single trade and view your trades as numbers.
- Accept Losses: Realize that losses are a part of trading. Take the lesson and move on without letting it affect your future trades.
- Set Up a Trading Routine: Develop a proper trading routine where you do an analysis, make your execution, and also review; this will keep you focused and disciplined toward trading.
Conclusion
Rather, trying to make the process of growing a small forex account using the 20-pip challenge reminiscent of how one is supposed to get their high-risk, high-reward strategy on, continually proving himself or herself with strict discipline, precision, and robust risk management. You start low, using a petty sum but with the hope of compounding your way into substantial gains.
This is important to remember because it involves tremendous risk and, therefore, one has to be cautious and, where possible, use a demo account to test if the strategy works before committing real funds. The 20-pip challenge is a very exciting challenge, especially for determined individuals who are willing to put in the time and effort to master the required skills and exercise strict discipline. Success, with this kind of lenience of mind, can only be born from success, according to the right trading principles.