IMHO, many of the posters in this thread have missed a very subtle but important distinction. There is a huge difference between a good trade and a good trader. Pips can be used as a decent measure of a good trade - but they are never the measure of a good trader. Any idiot can be lucky enough to make a good trade which yields a lot of pips and ultimately provides a (temporary) boost to the bottom line - but only a good trader has a high percentage of good trades that result in consistent results over time.
The analogy I would draw comes from gambling. I lived for years in Vegas and I can tell you that I made a lot of good bets in my time there. There were times when I would walk up to the sports book window and place a bet that I KNEW was a good bet. I didn't know for certain that it would win, but I knew that I was making the best possible use of my betting dollars - and it often resulted in a handsome payoff. So if a tourist on his first day walked up to the window and made the exact same bet right after me, was he placing a good bet? Sure. Did placing that one good bet make him a good bettor? Absolutely not. Even if the bet performed as planned and we both collected our winnings, there was a good chance that by the end of the weekend the novice was broke and I was still enjoying the site of the new money sitting in my bank account.
Another key fact is that of volatility (quantified often as drawdown). Suppose I showed you a mythical system that made 5 pips of profit EVERY SINGLE DAY without fail - no losses. And then suppose that I showed you another system that gave you 3000 pips of profit by the end of every year, but to get to that profit level, you had to endure huge drawdowns of 1000 or more pips. Which is the better system? Clearly, the first system is superior. Even though it yields fewer pips, it is infallible and as such, you can go "all-in" with it every day. Whereas with the 3000-pip system, you can only risk a small percent of your capital with each trade because you always have to account for the inevitable nasty drawdown.
This shows why pips alone cannot be the ultimate measure of the better trader, although they may indeed be the most convenient measure of the better trade. I also concur with previous posters who have pointed out that feathering into/out-of positions can lead to wildly misleading pip-counts that do little to quantify the success of your trade.
Having said all of this, I do understand why pips are so commonly refered to here as the common currency of performance. They are a basic unit that we all can all relate to and each one of us can apply our own money management techniques to the pips that are displayed in these threads.
The analogy I would draw comes from gambling. I lived for years in Vegas and I can tell you that I made a lot of good bets in my time there. There were times when I would walk up to the sports book window and place a bet that I KNEW was a good bet. I didn't know for certain that it would win, but I knew that I was making the best possible use of my betting dollars - and it often resulted in a handsome payoff. So if a tourist on his first day walked up to the window and made the exact same bet right after me, was he placing a good bet? Sure. Did placing that one good bet make him a good bettor? Absolutely not. Even if the bet performed as planned and we both collected our winnings, there was a good chance that by the end of the weekend the novice was broke and I was still enjoying the site of the new money sitting in my bank account.
Another key fact is that of volatility (quantified often as drawdown). Suppose I showed you a mythical system that made 5 pips of profit EVERY SINGLE DAY without fail - no losses. And then suppose that I showed you another system that gave you 3000 pips of profit by the end of every year, but to get to that profit level, you had to endure huge drawdowns of 1000 or more pips. Which is the better system? Clearly, the first system is superior. Even though it yields fewer pips, it is infallible and as such, you can go "all-in" with it every day. Whereas with the 3000-pip system, you can only risk a small percent of your capital with each trade because you always have to account for the inevitable nasty drawdown.
This shows why pips alone cannot be the ultimate measure of the better trader, although they may indeed be the most convenient measure of the better trade. I also concur with previous posters who have pointed out that feathering into/out-of positions can lead to wildly misleading pip-counts that do little to quantify the success of your trade.
Having said all of this, I do understand why pips are so commonly refered to here as the common currency of performance. They are a basic unit that we all can all relate to and each one of us can apply our own money management techniques to the pips that are displayed in these threads.