The 1-Pip Question!

I dont know what youre going to do with it, but I looks like I get 10 days off

All it shows is what I alluded to earlier, most pairs move a long way each day and theres a lot of safe places to grab some pips by taking advantage of that movement, and seeing where it reverses off an extreme.

G.

Well you enjoy it, go to the beach or something!


I'm sure there are! Ok, so that's day 1 out of the way, only another what, 999 days to go before we could say it's anywhere near consistent? See you back here in about 2015, same time?

You define consistent, and I'll post some more charts later, after im done trading.

G.

I thought you said you were done for 10 days (could have been 4 months if you'd held the trade!).

What's the chances of posting the chart before the trade......yeah, guess not, what was I thinking!

Same concept, different timeframe

http://i33.tinypic.com/jzd4ep.gif

I took the last 2 trades, as you can see one got stopped out, the other produces a much larger winner.

G.

Thanks Intu for providing the impetutus for researching my trading records of the "1 pip" experiment.

You are right about my purpose for the trial in every way. I was trying to show traders a way to condition the mind via a cheap experiment. If a person starts off with an incorrect premise it is virtually impossible to ever get to the goal they seek.

You are also absolutely correct about needing more than $50 margin to be able to risk the 25 cents/pip I used in the experiment.

Margin was not my concern in the experiment..., risk was.

It didn't register to me as a problem because I had an extra Oanda sub-account with a few hundred in it and I was limiting the risk on each trade in the experiment (only taking one at a time) to $50. If I lost my 200 pip risk on any consecutive trade the experiment would end.

In my original post about the 505 trades I probably should have highlighted my main idea of having a total risk of $50 per trade @ .25/pip to clear up any potential ideological conflicts.

Now, on to what I think is the most important idea you brought up:

The "1 pip" experiment is extremely useful to almost everyone who has tried it. And from completely different perspectives. It is very inexpensive to find out so much, and potentially profitable.

Trading for Just 1 pip is Difficult
I've received dozens of emails from traders who have tried the experiment and have told me their results and their reflections. Almost every one of them related how much harder it was to get one pip than they had previously thought. (I'm remembering the recent post of a questioner about how difficult could getting one pip be with a daily range of 100+ pips) It highlights how important your edge is in each trade you tender. When you are risking so much to get so little you reassess your previous trading notions.

Law of Contrast
The "law of contrast" infers that when two items/concepts are different, people tend to see them as more diverse if they are placed close together. In training your trading mind, there are few methods better than this technique. In the "1 pip" experiment, the act of obtaining a small and likely reward is contrasted with the unlikely-but-possible loss of 200 times greater.

No one I've communicated with indicated that they entered into their trades randomly-- in fact most took great care to try to get the best results; waiting for specific market types to enter. One gentleman I talked to was able to just get over 200 trades (breakeven in risk/reward terms) but most were able to get only 40 to 100 trades before a 200 pip loss appeared.

Because of the contrast of the risk/reward the mind tends to center on how likely it is to "put the hand in the jaws of the lion" successfully. Either your mind loves this challenge and CAN help you accomplish that task or you figure out another way to "skin the cat".

Trends Exist!
If you take this trading test, any result you get is fine. If you really try hard to get at least 200 pips profit before the inevitable 200 pip loss in a future trade you have done something pretty spectacular. You will have beaten the trading firm spreads which average about a pip or more and will have learned how important identification of the prevailing trend is. You will find that even searching out congested price action for obtaining quick 1 pip trades is a timebomb waiting to go off.

What you gain in mindset adjustment is a test of principles you already have researched -- and will give you personal ammunition for your future trading activities. You may find out that doing the opposite of the experiment---taking very small risks over and over to get a V-E-R-Y LARGE reward is the way you should travel.

And this doesn't mean that I am only advocating this to validate the low-risk/long tail trading concept as the only way to "skin the cat". I definitely know that route, and since it is a "law of contrast" type trading style -- it is not for everyone!

This experiment helped a successful short term trader who contacted me who has been scalping profitably for 10 years and never held a trade overnight. He told me it helped him realize that he needed to substantially cut his risk-per-trade to lower overall losses versus his higher win average but small profit style.

Socrates probably didn't invent it, but "know thyself" is an extremely appropriate phrase for traders to stick on their wall.

The mind is the trader's ultimate edge.

TRT

I had hoped to create some discussion and interest from Forex Factory on your initial post in 2008.

Thanks so much for taking the time to reply!

I found it to be an educational experiment as well. I tried it for about 3 days. Obviously, the risk/reward is terrible, but also significant was the "opportunity cost" of being stuck in a trade.
So much time can go by, where you miss other potentially profitable trades, waiting for that 1 pip.

The 1 Pip Experiment-

"And if you eventually get good enough to pull it off you will find that you are throwing away the greatest potential the market offers to get that pip." - TRT

--> ...trading with the prevailing trend for large profits.