Pipsing is a trading style whereby traders make a lot of trades each of which produces very small profits (virtually worth a couple of pips). Some traders believe that pipsing and scalping are basically the same thing. There are also those who believe that pipsing is a part of the scalping strategy since with scalping you make short-term trades that last several minutes, while when it comes to pipsing, trades can be several seconds long.
In this article, we are going to discuss what forex pipsing is, its psychological aspects, benefits, and challenges, as well as technical features that can be a decisive factor in the outcome of your trades.
1. Pipsing: Technical Peculiarities
2. Psychological Aspects of Pipsing
3. Profitable Pipsing: Forex Strategies
Pipsing: Technical Peculiarities
In essence, pipsing is a forex strategy used by traders to make a profit from price fluctuations in the course of the day. This is what its distinctive features are:
- As mentioned previously, the trades are opened for a short period of time, lasting from several seconds to several minutes.
- The trades are made on smaller timeframes, specifically minute time frames.
- A large number of trades (several dozen to several hundred) is made in the course of a day.
Accordingly, by choosing pipsing as their trading style, the traders need to factor in certain technical peculiarities that are irrelevant when it comes to other trading strategies. These include:
1. Liquidity of the asset. The higher it is, the greater the profit potential.
2. Internet connection speed. It has to be pretty high in order to ensure that the orders are executed instantaneously, as it affects the trading account and the outcome of the trades.
3. Pipsing requires minimum spreads. Familiarize yourself with the types of trading accounts and spreads offered by brokers, and choose the one with minimum commission. When it comes to scalping strategies, floating spreads are often more profitable than the fixed ones.
You can find out more about this trading style in the book “50 Shades of Forex”. It will help you decide whether pipsing is the right choice for you or maybe it’s better to opt for another trading strategy.
Psychological Aspects of Pipsing
Now you know what pipsing in Forex is. This trading strategy involves particular psychological aspects, which is why your personality type plays a crucial role here. How quickly you react to changes in the trading environment, and your ability to focus and deal with stress and emotionally challenging situations are essential. Pipsing is a physically and mentally demanding trading style which, however, has many advantages.
- You have to think about your trades only when you are actually trading because your positions remain open for no more than several minutes as you wait for the profit.
- You can trade whenever you’ve got the time for it (from one to several hours).
If you decide to try your hand at pipsing, keep in mind that you will be making loads of trades with a different outcome. By the end of the day, the yield curve may look kinked.
But it’s fine as long as your end result shows that you are trading in the black. Professional scalpers and pipsers came up with three main rules to help you succeed:
1. You don’t have to check your results during the trading session, as it may fluctuate many times and cause unnecessary stress. Better focus on the accuracy of your entries made according to your strategy.
2. Determine the threshold for your risk management (the number of losing trades in a row after which you will have to stop trading or take a break). To be on the safe side, enter these values in Risk Manager.
3. Do a daily analysis, identify mistakes you make repeatedly, and make the necessary adjustments to your position entry checklist that will help you avoid them.
Profitable Pipsing: Forex Strategies
Now let’s get to the most interesting part. What strategy to choose for pipsing? To spot the entry points, the traders use:
- Indicatorless strategies;
- Trend indicators;
- Combination of trend indicators and oscillators.
You can choose other techniques based on your preferences and needs. But how do you figure out that a particular trading strategy works in your specific case? The rules are a no-brainer: pick the one that is clear to you and whose signals you can spot easily, the one that is suitable for you in terms of speed with which the position is opening, and, last but not least, the one that proves to generate profit based on results of 1-2 days of testing.