Breakeven Trades, What Is A Pip In Forex? Bollinger Bands

Happy Sunday,

Welcome to this week’s edition! We’ve packed it with valuable insights to help you on your trading journey. This week, we’re exploring the psychology behind breakeven trades, breaking down what a pip is and why it matters in forex trading, and diving into Bollinger Bands to help you identify market trends and volatility. Let’s jump in and take your trading skills to the next level!

This week’s edition:

🧠 Breakeven Trades

📈 What is a Pip in Forex?

🚀 Bollinger Bands

Every forex trader aims for profits, but breakeven trades—where you neither win nor lose—are often overlooked. While they don’t grow your account, they play a key role in capital protection and emotional discipline.

Understanding Breakeven Trades

A breakeven trade occurs when a trade closes at the exact price where gains equal losses, resulting in zero profit or loss.

There are two common types of breakeven trades:

📌 Breakeven Trade That Could Have Been a Winner

• The market moves in your favour.

• It reverses, hitting your breakeven stop loss.

• Then, it moves back in your favour and hits your original profit target.

This often happens due to market volatility or news events. While frustrating, these trades protect your capital, which is a win in itself.

📌 Breakeven Trade That Could Have Been a Loss

• The market moves against you.

• It turns around, allowing you to exit at breakeven.

• Then, it reverses again, hitting your original stop loss.

In this case, closing at breakeven saved you from a loss, making it a smart decision.

The Psychology Behind Breakeven Trades

Traders sometimes exit at breakeven due to fear of turning a win into a loss. Others hold on to losing trades, hoping they’ll recover. Recognizing when to cut losses and when to let winners run is crucial.

Final Thoughts

Instead of dismissing breakeven trades, analyse them. Did you follow your plan, or did emotions take over? Learning from these moments helps build stronger trading discipline, bringing you closer to long-term success!

A pip (percentage in point) is the smallest price movement a currency pair can make in the forex market. It helps traders measure price changes and calculate profits and losses.

Understanding Pips & Pipettes

📌 Most currency pairs go out to four decimal places, so one pip is usually 0.0001.
📌 Japanese yen (JPY) pairs use two decimal places, making one pip 0.01.
📌 Some brokers use pipettes, which are a tenth of a pip for more precise pricing.

Example:

• If EUR/USD moves from 1.1050 to 1.1051, it has moved one pip (0.0001 USD).

• If USD/JPY moves from 123.45 to 123.46, that’s a one pip (0.01 JPY) movement.

How to Calculate Pip Value

Since currencies have different values, the pip value depends on the currency pair and trade size.

Example 1: USD/CAD at 1.0200

• Pip value = 0.0001 ÷ 1.0200 = 0.00009804 USD per unit

• If you trade 10,000 units, a one-pip move equals $0.98 USD

Example 2: GBP/JPY at 123.00

• Pip value = 0.01 ÷ 123.00 = 0.0000813 GBP per unit

• A 10,000 unit trade equals 0.813 GBP per pip

Final Thoughts

Most brokers automatically calculate pip values, but understanding them helps you manage risk, set stop losses, and calculate potential profits. Mastering pips is key to successful forex trading!

Bollinger Bands (BB) is a popular technical indicator developed by John Bollinger to measure volatility and identify potential overbought and oversold conditions in the market.

How Bollinger Bands Work

Bollinger Bands consist of three lines:
✅ Middle Band – A 20-period Simple Moving Average (SMA)
✅ Upper Band – 2 standard deviations above the SMA
✅ Lower Band – 2 standard deviations below the SMA

📌 Wide Bands = High Volatility
📌 Narrow Bands = Low Volatility

How to Use Bollinger Bands in Trading

📈 Spot Overbought & Oversold Levels

• Price near the Upper Band → Market is overbought, potential reversal down

• Price near the Lower Band → Market is oversold, potential reversal up

📉 Identify Trend Strength & Breakouts

• If bands tighten, a breakout in either direction may be coming.

• If price moves outside the bands, a strong trend continuation is possible.

Bollinger Bands Strategies

✔ Bollinger Bounce – Price tends to move between bands, providing potential buy/sell opportunities.
✔ Bollinger Squeeze – A narrowing band signals low volatility, often preceding a breakout.
✔ Confirmation with RSI or MACD – Using BB with momentum indicators improves accuracy.

Final Thoughts

Bollinger Bands are a great tool for measuring market volatility and trend strength, but they should be used with other indicators for better accuracy. Master them, and you’ll gain an edge in forex trading!