Argument for the larger T.P.:
Margin is dependent solely on the number of trades and size of lot and your leverage.
If you have 10000 in your account, and make only one trade ( say .20 lot) How much loss can you take before margin call?
Say your broker gives you 50:1 leverage. Margin = total contract size (.20) of lots/leverage = 250 When equity = free margin, the margin call goes out:
Principal - debtload (profit/loss) = equity.
equity -margin = free margin. so you start out with 9750 free margin.
as your debt load increases, your equity decreases (with the same debt load)
when debtload increases to about 9000 you start getting warnings about margin call.
Now, you make two such trades.
Then each trade can go down only 4500 or so
20 trades can go down only 450 or so.
so the fewer the number of trades you have open in loss, the greater the loss you can carry before you hit margin call.
If you have debt load of 5000, somewhere around x number of trades this will cause margin call
But if with the same load of 5000, if you reduce the number of trades (by increasing the size of the tp per trade, say to double, and halving the number required to give you that load) you can go almost twice as far.
Since margin call is the biggest reason you might be prevented from letting the market come back and bring your losers into profit (It will do that sooner or later, if you survive), The further you can get from it the more secure your trading method will be.
Thus, the smaller the lot size ( you get bored if it's toooo small) and the larger the take profit, the more secure you are in your trades.
now, if you make the tp too far away the price can wander up- and down, and up and down, and never close. So, from experience, you want to adjust the size of T.P. so that a good move will give you profit. 50 pips seems like a good number to me.
(six years I have been trading and never stopped to figure that out )
Margin is dependent solely on the number of trades and size of lot and your leverage.
If you have 10000 in your account, and make only one trade ( say .20 lot) How much loss can you take before margin call?
Say your broker gives you 50:1 leverage. Margin = total contract size (.20) of lots/leverage = 250 When equity = free margin, the margin call goes out:
Principal - debtload (profit/loss) = equity.
equity -margin = free margin. so you start out with 9750 free margin.
as your debt load increases, your equity decreases (with the same debt load)
when debtload increases to about 9000 you start getting warnings about margin call.
Now, you make two such trades.
Then each trade can go down only 4500 or so
20 trades can go down only 450 or so.
so the fewer the number of trades you have open in loss, the greater the loss you can carry before you hit margin call.
If you have debt load of 5000, somewhere around x number of trades this will cause margin call
But if with the same load of 5000, if you reduce the number of trades (by increasing the size of the tp per trade, say to double, and halving the number required to give you that load) you can go almost twice as far.
Since margin call is the biggest reason you might be prevented from letting the market come back and bring your losers into profit (It will do that sooner or later, if you survive), The further you can get from it the more secure your trading method will be.
Thus, the smaller the lot size ( you get bored if it's toooo small) and the larger the take profit, the more secure you are in your trades.
now, if you make the tp too far away the price can wander up- and down, and up and down, and never close. So, from experience, you want to adjust the size of T.P. so that a good move will give you profit. 50 pips seems like a good number to me.
(six years I have been trading and never stopped to figure that out )