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[RandalFrost]

How hard is it to average 200 pips a month?
For the uninitiated, being profitable @ 1 pip a month is near impossible.
However, 200 pips a month for seasoned players shouldn't be too spectacular a result.

Now, how hard is it to average 2 pips a month?
Its it even possible to survive on 2 pips a month?

100 Lots
2 pips = USD2000

50 Lots
2 pips = USD1000

Now, can a person survive on USD1000 a month?
In my part of the world: definately.

2 pips a month doesn't appear to be too hard for someone who spends a least a few months learning and paper trading.

But as we all know, appearances can be deceiving...and thus, I am asking for your opinions.

[mishak]

Hi RandalFrost
You've asked a good question
I'll look at the problem one step at a time

1. You say 100 Lots * 2 pips = $2,000. It means you are trading "standard" 100,000 lots and pip value is $10.
Your margin requirements under new rules are $2,000 for every standard lot. So, to open a position of 100 lots you'll need $200,000 money on your account with a broker.
For 50-lots trading your margin requirements will be $100,000.
Is it OK with you ? Fine

(btw, if you can live on $1000 per month, it will take you 100 months = 8 years to spend $100,000)

2. One really needs to be a Warrior to hunt for 2 pisp on 50-lots position. The general rule about psychology on forex means
the larger is your open position, the more vulnerable (uncomfortable) you feel yourself
Well, open position size - it is a personal decision.

3. The most difficult problem that any beginners will face sooner or later on the forex market is:
to choose what to do at any specific moment - to BUY or to SELL
If you know the answer, please proceed to the next step.

4. Assume we have everything in place till now:
- we have money with our broker to trade and we feel ourselves comfortable.
- say the EUR/USD quote is 1.1630/35 and we know that we should SELL (for example).
- so we sell EUR/USD at 1.1630 (at bid price) and have THE open position now.
What will be the next quotes on EUR/USD aftet we have open our position ? make your choice
1.1629/34 or 1.11630/35 or 1.1631/36 or whatever ...

Suppose our best - the price is going down after we've sell - next quote for us will be 1.1629/34.
If we decide to close our position right now, we shoud buy at 1.1634 (at offer price). So, we buy at 1.1634.
What is our profit now ? We've sold at 30 and bought at 34 ...
Wow-ugh, we have a loss of -4 pips.

Why is that ? - because of bid/offer spread that "we should pay" on every round trip (open-close, sell-buy).

Ok, which should be quotes for us to make +2 pips profit ?
We've sold at 30, so we need to buy at 28 (on the offer side).
The quotes should be 1.1623/28.

5. What happen if the price moves against us for 2 pips ?
Say, we have sold when quotes were 1.1630/35 and the price moves UP - at the opposite direction - for 2 pips, the quotes will be 1.1632/37.
If we decide to close our position now! we should buy at 1.1637 (at the offer side). Our loss will be -7 pips

6. What is our loss in $-value ?
Well ( -7 pips) * ($10 pip value) * (50-lots position) = $ -3,500

(btw, do you recall step #2 - how do you feel about losing $3,500 per month ? )

I've tried my best to voice my opinion. Please make your consclusions, RandalFrost

Take care

[RandalFrost]

Thank you, mishak, for the in-depth reply (many good points/info).

USD2000 out of 2 pips = USD200k margin
USD2000 out of 20 pips = USD20k margin
Both are fine with me.

Asking whether scalping 2 pips of profit is possible or not wasn't the main intention of my post.

Rephrase:

Is average monthly profit (in pips) size directly related to the difficulty in obtaining it?
Do you find 200 pips average a month easier to obtain than 2 pips average a month?
(Of course, this is counting losing trades + winning trades)

Or rather, is making a 200 pips a month system significantly harder than making a 2 pips a month system?

Perhaps making a constant profit itself is the problem, with no difference whatsoever at 2 pips a month or 200.

If a 2 pips a month system is much easier than making a 200 pips a month system then wouldn't it be better to rely on the 2 pips a month system and raise the position size instead?

[mishak]

Well, assume we count our monthly pips P/L for one lot.
(discussion about count pips you may find here --> Pips question

I would say - it is impossible to make 2 pips profit per month (due to the spread)

Comparing 20 pips monthly profit to 200 pips, I would say -
definitely 20 pips is easier.

If you, RandalFrost, ask "How much easier?"
I would say - two or three times easier.

Please make your consclusions

[RandalFrost]

Originally posted by mishak


If you, RandalFrost, ask "How much easier?"
I would say - two or three times easier.

Therefore for 1 lot, 20 pips is 2 to 3 times easier than trying to get 200 pips.

What about 20 pips of 50 lot compared to 200 pips of 50 lots?

I have this impression that number of pips gain (as in the actual moves it self, regardless of lot size) is not relevant to profit since you can increase lot used to increase profit.

Thank you, the friendly neighbourhood mishak, for your patience.
I was half expecting a "stfu noob".

[mishak]

I have this impression that number of pips gain (as in the actual moves it self, regardless of lot size) is not relevant to profit since you can increase lot used to increase profit.

Well, I think the opposite

First, 1 lot is easier than 50 lots (as I've mentioned above).

The word profit may mean $-profit and %-profit. Pls compare:
$-profit - my profit is $200 on $1,000 investment (absolute figures).
%-profit - my profit is 20% annually on $1,000 investment (relative figures). Means the same $200 profit in this example.

%-profit is more intriguing characteristic as it allows to compare two different investment opportunities which involve different capital. So, people ase usually speaking about %-profit.

Let me put it this way - what would you like better:
- to make $1,000 profit on $100,000 investment capital
. . . . . or . . . . .
- to make $200 profit on $1,000 investment

%-profit will be 1% and 20% correspondingly in these examples.


Some forex treaders often speak about pips-profit. It is usually meant in relative sense - not taking position size into consideration. (look the ref. above)

So, increasing your position (number of lots) you will increase yout $ profit (or loss ). However, your %-profit will be the same.
And pips-profit will be the same.

Well,
20 pips of 50 lot is easier than 200 pips of 50 lots
but
20 pips of 50 lot is probably more difficult than 200 pips on 5 lots.

That's it for now

[peteuk]

Originally posted by mishak

Let me put it this way - what would you like better:
- to make $1,000 profit on $100,000 investment capital
. . . . . or . . . . .
- to make $200 profit on $1,000 investment

%-profit will be 1% and 5% correspondingly in these examples.

Haha, me again! Mishak, I see you didn't get a chance to respond to the '10% of equity as margin' question in this thread

Also, the above example is 1% and 20%

RandalFrost you're trying to do what every new trader tries to do, re-write the laws of trading We've all done it, and we've all failed at it and resigned ourselves to the fact that only certain methods are profitable. I thought exactly the same as you at the start, a few pips at mega leverage and I'd be in the money.....it doesn't work, it never has and it never will. You know why? Every new trader's main problems are letting losses run in the hope the market will turn in their favour, and cutting profits short ie taking the first few pips. So, you have a few good trades at 5 pips or so profit per trade, then you have one bad trade at 40 or 50 pips or more loss which not only wipes out your profit but also puts you in loss. It doesn't work, period!

The only strategy that works in this game is correct money management, correct risk/reward ratios, and the discipline to trade both. Predicting direction is secondary, you could flip a coin to decide entry and you'd still make money, but without the first the second is useless.

Check it out, try your startegy (on a demo), try lots of different strategies and see the end results, it's the only way to learn.

Believe me or don't believe me, it makes no odds to me, I'm simply trying to save you (and anyone else I offer advice to) making the same mistakes I made, I wish I had come across someone like that before I lost my shirt the first time round, but then like every new trader I thought I knew better

Cheers
Pete

[mjk24601]

Randlefrost
I never found that trying for a paticulair fixed profit or loss was very helpfull in my trading. The markets are more a force of nature and you will need to take what they are willing to give in any paticular stuation. Its more like a farmer would like to grow 60 busheles of soybeans an acre, and seed supplier says that a 60 bushel yeild is typical, but the farmer can not account for the weather, insect infestation, and deer and other wild animals getting into his fields. Nothing is easy when it comes to trading these markets as you are up against your own worst enemy, that being yourself. Nobody on these boards can change the dynamic that you will be completely responsible for all of your gains and losess.
Changing you position size is part of your advantage in trading and for me me part of a good money managment system. In choppy, Ill defined markets I trade 1 lots or a min contract postition, but when I find a strong trend I will increase my size to 10 standard units. Different strategies apply to different type of markets and I feel as if you are looking for generic answers to far more complicated questions. I, as well as everyone who has bothered to reply to post would like to see you be succesful in this endevour. I feel that all these question you have asked, you will need to answer for your self by opening a demo account and practicing different systems and techniques untill you have the self confidence to trade live. Just remember to try to treat you your demo money as if it were real and you will get a good feel for how a live account would work.
Every trader has different trading styles, comfort levels , and results. I am sure you will find yours. Tomarrow is another trading day. I think you should get out there with your demo account and give this a spin. Please let us know how you are doing and what your observations are as everyone who has responded to your question would like to help in you development as a trader.
I am probably way off topic and I am sorry, I am just trying to help.
Michael

[mishak]

Great point you've made, thanks

I never found that trying for a paticulair fixed profit or loss was very helpfull in my trading. The markets are more a force of nature and you will need to take what they are willing to give in any paticular stuation.

I agree completely


to PeteUK
you got me, 20% of course, thank you

[RandalFrost]

OMG, now I am thankful to God that i have asked that particular question on this forum.

If not for you guys, I would have to find out the truth for myself at the market...whom happens to charge a hefty tuition fee in the process.

[csaunders]

Ahh... come on if you're sure (semi) based on event reactions where the market is going why not ride 5-15 pips with 10 lots - I've done this quite a few times - with sweaty palms and all.

I'd go bigger than 10 although my broker only guarentees stops up to 1mio.

This is not gambling its riding immediate movement based on an event - not the general flow of the market.

Not for everyone but for me a good percentage trade.