The 20 pip challenge is a trading strategy for the Forex market in which you can grow an account from just $20 to $50,000 over the course of 30 trades.
The idea behind this scalping forex trading strategy is that there are many a currency pair which are considered to be a volatile market, and it’s fairly easy to grab 20 pips a day from these pairs.
How does the 20 pips a day trading strategy work?
In order to grow quickly from $20 to $50,000, this trading strategy relies on you risking the entire profits from your last trade to make 30% more profit on your next trade.
For every position, you look for trade setups that have a profit target of 20 pips.
Every time you make 20 pips, you’ll progress from one level of risk to the next. You can in theory make 20 pips a day, so progressing from one level to the next every single day is possible.
Here’s how your account balance should grow.
On day 1, you’ll place a 0.03 lot trade with a $20 balance. Assuming you win the trade, your balance is now $26.
For your next trade, you will risk $6 and your target profit is 30% more, or $7.80. If you win this trade, your balance will be $33.80.
Your risk will always be your entire profit from your last trade and your profit target will be 30% more than you made in the last trade.
If you lose a trade, you just move back down one level.
So if your balance was $33.80 and you lost a trade, your balance is now $26, and your next trade’s target is to again make $7.80.
By the time you reach level 30, your balance will be $52,399.91.
The best part is that your actual risk was only $20.
20 pip challenge Excel/Google Sheets spreadsheet
It can get quite difficult to calculate lot sizes for every trade if you’re following this trading strategy, so the trade who originally developed this strategy made a spreadsheet that you can follow.
I’ve modified the spreadsheet a little to let you take 10, 15, or 20 pip trades. This way, you don’t have to wait for a setup that will net you 20 pips. You can continue following this strategy even if you find a slightly smaller setup.
Note: this is a read-only sheet, so open the file menu and click “Create a copy” to copy the sheet to your Google Drive.
How practical is this trading strategy?
As a scalping forex trading strategy, the idea of making 20 pips in a row for 30 trades and growing an account from $20 to $50,000 is incredibly captivating.
However, the reality is that it’s very difficult to win 30 trades in a row, and at some point, fear or greed is going to give you a really hard time.
After all, once you’ve grown your balance from $20 to $1000 or more, you’re taking on significant risk with every trade.
It’s also tough to find trading setups that exactly fit the risk-reward criteria required by this trading strategy.
For example, if you were on level 5, your balance would be $57.12. You need to make $17.14, and your maximum risk is $13.18.
A 20 pip trade would be 0.09 lots, which is about $0.90 per lot.
That means you would have to find a setup where your stop loss is around 14 pips and your take profit is 20 pips.
Finally, if it were really that easy to grow an account from $20 to $50,000, a lot more professional traders would have managed to pull it off!
Which currency pair can get you 20 pips a day?
The 20 pips a day system is essentially a scalping forex trading strategy, which means you need to trade a volatile currency pair that routinely moves 100 pips or more per day.
Ekeing 20 pips a day out of a pair that moves so much is somewhat possible.
These are some volatile pairs that move quite a bit:
What’s the best scalping forex trading strategy to get 20 pips a day?
Every trader has their own trading style and strategy, and any strategy can be used to make 20 pips a day.
Some traders prefer to use price action and price movement, while others will use technical indicators to help establish buy rules and sell rules.
One of the simples price action strategies out there is the breakout and retest of market structure.
Here, you wait until price breaks through a significant support or resistance level. After price breaks, it should come back to retest that level.
The retest can either be a candle in the opposite direction, or if the market is very volatile, it can also be a wick back to the broken level.
You enter the trade once price retests, and your first take profit is the extent of the original breakout. At that point, you can move your stop loss to breakeven, take some profit off of the table, and let the rest of the trade run.
Perhaps the best piece of advice I can give you to succeed with the 20 pips a day strategy(and in Forex trading in general) is to NOT try to get more pips unless you’ve secured some profits and reduced your risk on the trade.
Remember, every trade you place is an opportunity to lose money, so make sure you’ve got a clear stop loss and take profit in mind, and be prepared to move part of your stop loss and take profit to mitigate your risk.
My trading results on a demo account
It would be foolish to try and trade this strategy on a live account right away, so you should definitely play with this strategy on a demo before you try it live.
I managed to reach up to level 6 before everything collapsed and I was set all the way back to level 1.
I tried multiple times but it’s very difficult to maintain discipline when there is so much money at risk in every trade.
I am most profitable when I immediately take some profits off of the table and let the rest of the trade run.
Related: 10 pips a day compounding strategy
On the whole, this strategy is very good on paper, but very difficult in practice. Losing trades will play with your psychology, and you’ll need to have rock-solid resolve to follow your trading plan in order to continue pushing forward.
In a future post, I may modify this strategy and stretch it to 45 or 60 trades with less risk per trade in order to make it more practical.