:: Pips are not what counts ::

And thanks for all of them. On balance there are more here that disagree with me than agree. I see pips as a common demononator to arrive at profit. Of course it's the profit that matters - but I still say you arrive at that from the pips you make. Somebody wrote you could have negative pips but still have a profit. No you can't - not if the pips are calculated by the method, IMO, makes most sense.

Oh well, there we have it. More people are against me on this than with me. Nothing new there then. Everyone, have a great week. Go for your pips, profit, expectancy, competancy, equity, risk, win ratio, weighted average formula, etc. The way I trade pips convert to profit and provide a simple (I thought) yardstick to measure success by. Not any more.

Most important for me is %-age increase of equity, not pips.
20% increase in any amount of capital is equally important, for ex. +$1000 on $5000 capital or +$10k on $50k capital.

I concur.

Pips Matter, but not as much as your return. I can make 3000 pips and still lose money off my capital

1) The success of a trade is measured in pips, but only positive or negative, no numbers. Positive pip count, good trade. Zero or negative pips, bad trade. It's a bad trade because it didn't gain you anything but a sour taste in your mouth. All of this is taken under the assumption that you actually followed your rules to a T so you did everything you were supposed to and the market just moved against you. Otherwise, you deserved to lose.

2) The success of an account is measured in $. Sure, people try to say "but it's a good account, I'm up 200 pips this month!" That's great, but the point is, your account is really growing by 200 pips worth of money. Granted, as was pointed out, you can have a positive balance change with a negative pip count, but that's like saying that "well, I lost my car in a wreck, but I got $500 more on the insurance check than what it was really worth".

3) The success of a trader is measured in the gains of their account over time. Some of us view this in terms of equity gains/losses, or as a percentage change. Hell, you could look at in terms of money risked versus money earned, ala expectancy.

A personal observation of mine: The more experienced (notice I don't say successful, just experienced) a trader becomes, the more they tend to filter down from 1 to 2 to 3.

And with that, back to studying for finals.

It's rather simple for me -- if my month to month NAV is +, then I'm happy. If it's not, then I need to look and see what I'm doing wrong, OR, whether it's just one of those, "weathering the storm" kind of things...

so the bottomline is that pips, if used wisely, can give a positive NAV if used incorrectly can kill ur acccount...even though u have +ve pips

Talking in terms of pips puts all traders on the same playing field.

If someone says, "hey, I just made 100 dollars in a trade", that's great, but it doesn't tell you if he made a great trade or got lucky once and took 1 pip.

I trade the markets for a living.

Years ago I realized that thoughts are things. If you think correctly, and see things as they truly are, obstacles move out of the way and you become more successful at the things you spend time on. Like trading.

Trading isn't easy to do or a thing to brag about. Anyone can do what I've done if they look at trading as an occupation, a business.

But, not a quest.

I appreciate the quote from Darkstar

"That expectancy number is what you can expect your system will return for every dollar you put at risk over time. It really is powerful because it allows you to compare systems with very different attributes. If you caught the recent post on FF about the how the number of pips a system makes is irrelevant, this is what we were discussing. A system that generates 50 pips a month with a 0.95 expectancy is dramatically lower risk than one that makes 1000 pips a month but only has an expectance of 0.05. Would you rather make $0.95 for every dollar you put at risk or $0.05?"

Pips do not matter, except in the point of how much money (position size) you have at risk on the pips in question.

More money is made on the forex "carry trade" than is earned by any group of speculative traders looking at the entrails of every technical indicator. This fact should be sobering for those who think some lightly concieved notion will transform them into Jesse Livermore overnight. See P.S. at bottom---

That doesn't mean that great money can't be consistently made from volatility and directional trades. I do, because it is my niche. I know it is a niche, and respect that it is just a niche.

Part of a bigger picture.

My main forex money earner is a volatility based system which "earns" only about 3.5 pips a day average over the course of a year, or about a hundred pips a month. But with extremely high expectation.

Trading 20 or more lots on this system is easy to accomplish and execute with no slip. If you felt that making lots of pips proved something, you could probably include some sort of "grid" trading structure to make that 35 pips a day average, but now the risk would be 10 times (or more) greater and you still wouldn't make any more money because you would have to divide your position size to do it.

Risk adjusted return, not pips, rules the day.

TheRealThing

PS: Trade the market in a way it allows you to profit consistently over time. The market does not care who profits from its actions. Those who consistently profit the greatest understand what is going on better than the other participants. You can choose to follow the market where it wants to go an obtain what you want.

And that's why I started it. It grew out of something else. Pips could be considered irrelevant but it is an easy way to put people on a level playing field.

The profit only matters to the individual. But as I've written before and, thank you blueruby, you have said it clearer than I did perhaps, pips do count for comparitive purposes. And they count for profit as well. So pips are what count. It's your profit. My view is unchanged.

I disagree. Your 100 pips mean nothing if you only increased your equity by .01%. My 50 pips are more meaningful if I increased my equity by 3%.

Talking in % of equity is something that doesn't need translation nor explanation. That's the true measure of trading success. After all, do you see mutual funds or hedge funds measuring their yearly performance in points won or lost? Of course not, it's all done in percentages. An investor doesn't care one way or another if you won 10,000 pips in a year or 1,000. He's only looking at two things, drawdown and ROI...both of which are described in terms of % of equity.

And of course you're right - for companies reporting to investors. But for comparitive purposes where size of account does not matter but trading skill does then pips remain a simple way to create a level playing field.

Profit percentage of capital (ROI) isn't affected by size of account at all. 20% means 20% regardless of size, right? The one having actual power is ROI, its compounding effect is superb. Pips don't compound.

I have to agree with the rest, pips mean nothing, even for comparative purposes. I often have a position where 200 pips is less in value than the 50 pips of the next position.

The majority says pips don't count. You know, the funny thing is this thread started because all I wanted to do was create a level playing field for the suggestion I made here easily.

I wanted to let the trader in who trades a micro the same as the guy who trades institutional lots. Perhaps ROI is the way forward. It probably won't matter any way. Merlin is not too keen on my suggestion to only let profitable traders in to the FF 2nd tier.

And if you haven't commented on the idea for an FF 2nd tier and you have an opinion then perhaps you'd like to. It's being worked on now. I just feel they may end up going down the wrong road. It's at the link above.

Ladies and gentlemen, thanks for your comments even if you disagreed with me. Which was most of you. C'est la vie.

I know a lot has already been said in this thread but I'm gonna add to the noise anyway.

Any fund measures it's performance, not in pips, but in percenatge return vs risk eg. sharpe ratio. This of course, is over the course of multiple trades.

If you want to brag about doing well, post your percentage gain on your NAV.

Which would I rather.....Say I worked at the mall for $7/hr.
The Doctor who had the money and grants to go to medical school for 4 years makes in one hour what I make in a day.
So which would YOU rather?

I'd rather spend a $1, get a lottery ticket, and get a few million from that amount of effort. That'd beat the whole board wouldn't it?

This is what you're asking me. As per the original theory, my pip is worth the same no matter what. My pip doesn't have the ability to trade 10 standard lots. I'll take the 8,000 pips right now. Next year, compounded, that many pips with high leverage I could comfortably trade 15lots.
Next year I trade half as much with 8 standard lots, I now turned the compounded 8000 pips into $320,000 from $100 investment. [(8000/0.5)(8 *$10(standard lot))]

But hey, the 8,000 pips doesn't matter right? It wasn't impressive the first time. Because the guy who did two trades last year with 50 lots made my yearly $ figure in 2 trades.

Which is what I gather from this board, except the one poster who mentioned carry traders. But I already alluded to them originally. so opinion not changed.

Or lets say I have $5,000. I open an account. Price action in Forex will always go down or go up. There's no third dimension. So like roulette, I initiate a trade at 1am New York time. The lull prior to Europe open. With that much money, at 200:1 leverage, I believe we use 8 lots($500/lot). not 10 to keep a buffer. Take profit 100 pips, let it ride. I was using random number, but what do you know, he made $8,000! And that was it for the year. Pretty easy wasn't it? No time at all!
On the other hand, with a good leveraged broker, at margin call, the "trader" will then get $4000 back, and will be able to keep trading that as it goes down or up. The "trader" would have to lose 12 pips prior to being margin called too.

So I take it that as long as I'm happy, that's all that matters. And I'd like to think if I was applying to work at a hedgefund, they'd be impressed with 8,000 pips. So I guess I better start working harder!

And I like percentage gains too. Forex just has this nice little thing where pips are standardized.

I don't understand quite what you point you want to make by this? Sorry.

That would be completely and utterly chance. Person Y made 160 pips for the year because he knew he could and would.


I didn't say it wasn't impressive, its very impressive, but the massive amounts of stress, pressure and multiple decisions you'd have to make to achieve this would be something person Y would have the luxury of avoiding.


And its here i'd say we differ in opinion. If 8,000 pips year after year is what you think will define someone as a better trader than everyone that doesn't achieve that, then I wish you every success. If you have dreams of working for a hedge fund, I wish you well in that too.

But as for me, a successful trader is a quiet achiever, knows what he wants, knows how to get it and does this year after year. In complete control all the time.

My view on this has nothing much new, but has something at least in an articulated way, and not a mindless "i have lots of money, im the best" kind of thinking.

As the thread autor first said, pip should count in the way of getting classification for the traders and the common sense says that the main objective is predicting market movements and invest on them, or in other way, the primary rule and the obvious one, buy cheap, sell expensive.

Why do i "put this on the table"? Its simple, if someone is getting negative pips, the logic conclusion is that he is buying high and selling low most of the times, or in other words he is being the one, who everybody fools.

One guy said, "well a martingale guy can be on profit with pip loss"

And I say. The martingale guy will cry someday...

Another guy said, "well you could win xxx pips but only have a 0.1% profit."

I say. Lets not exagerate. Ppl who make hundreds of pips a month and then have mediocre profit, dont deserve to get that many pips because they waste their precious gift of prediction, on a lake of fear that tells them that they will loose it all unless they invest something like 0.000000000000000001% margin. Thats sad.

At the other extreme, if i invest 100% margin i can win 500 % in a month and the other month another 500% and lucky me another 500% in the third month, the average profit on that its huge. The equity of that guy can crush all the market. hhuuuuh what a trader.... next month... he loses 100 pips... bye bye...

Its possible to have an incredible fase of setups that last for months getting a guy rich using super margins and then retire and say, im the best. Too bad only the lucky (not the best) invest all in those fases, but the guy who makes lots of pips will win the rest of his life with ease, less stress and almost 100 sure of his future sucess.

In conclusion lets see..

A person that wins lots of pips for a long time, its more than 90 percent garanteed to be one of the gifted that get a sucessful trading life, the same thing cannot be said for sure about the "martingale guys" even if there are some sucessfull ones. For me, they are just disasters to happen.

Only an hecatomb would take out an experienced guy who in the past years got more than 100 pips month.

A person that win lots of money trying to run against the losses with more investment, can be a sucessful trader too, but how many ppl do you guys think that will make it trought out years of trading with the hands in the top of the head worrying about on more loss that they will have to correct with more margin and who knows what could happen?

We are talking in a general way so, in an "average" way of thinking i guess that its better to classify a good trader (in the average crowd), a guy that look at the information avaiable and tells what will happen in the future correctly, than a guy who looks at a chart and gets wrong most of the times, and the only way of saving is loss is at least getting those easy "99% garanteed trades" and put all of his hope and money on that ones.

Does fixing inumerous stupid trades with more money makes anyone a better trader than the guy who nails lots of trades. I dont think so...

If a guy who gets lots of pips is winning poorly the only thing he has to concern is about adding margin, looking behind for those moments when he had to take a breath. I mean, if a guy spent the last years trading and the worst thing that happened was losing 20 percent of his total, well.. a 20 percent margin or a more cautious margin of 10 percent its very good. Why risk less if the last years said that even if the guy loses 1/5 at the worst, he has more 4/5 to risk. Why 0.5 margins?

I just laugh another day when i saw here in the forum a guy grabbing about his 800 pips corresponding to 5 percent profit. What kind of dumb is him?

With this kind of margin the guy needs to lose 16 000 pips to lose it all, omg... Sixteen THOUSAND and not winning nothing more. And that 16 000 would have to be in a single row... because once he gets out of the trade he might correct the lot positioning to fit the same margin again giving him another 16 000 thousand pips to spend in a single row. This its just too wierd or im really stupid to understand.

PS: Why Oh Why, dont you worry about the majority of opinions. Ive been in a Poker forum for sometime and the wierd thing that i read a lot there, is that, the best poker player is not the guy who wins more times or gets in better positions or even the guy who dont win with luck. The best guy is the guy who wins the most money. A poker prodigy with little money to invest its not worth to be considered a great player. The best player for the crowd is the one who wins 1 time but wins a lot, its the history of human kind .

I didn't realize there was this much controversy over pips. But then agin trading is all about consistency.