Counting pips

[bobnat]

I'm curious as to how others would view this particular situation.

You short 3 lots. You take one lot off at 20 pips profit, another at 80 pips profit, and then are stopped out at BE on the final lot.

How would you count it?

Nat

[peteuk]

Originally Posted by bobnat

I'm curious as to how others would view this particular situation.

You short 3 lots. You take one lot off at 20 pips profit, another at 80 pips profit, and then are stopped out at BE on the final lot.

How would you count it?

Nat

Hello bobnat

To be absolutely correct I guess in % of equity terms as it's the only meaningful number imho.

As an actual market move it would have to be the difference between entry and exit price.

To impress others each lot could be counted individually and it looks good on a results spreadsheet but I think most people are wise to this by now.

Why do you ask?

[bobnat]

Originally Posted by peteuk

Hello bobnat

To be absolutely correct I guess in % of equity terms as it's the only meaningful number imho.

As an actual market move it would have to be the difference between entry and exit price.

To impress others each lot could be counted individually and it looks good on a results spreadsheet but I think most people are wise to this by now.

Why do you ask?

I agree, only equity really matters in trading.

I ask because I know a guy who is selling signals and he ran into this situation last week and he asked me how I would count it. My initial response was basically the same as yours, but he needs to be able show something. From his perspective, his customers made money even though they got stopped out from the original entry and he wants to be able to say, "We made xx pips". And it makes sense in a way because he has no idea or control over how much equity his customers risk or win. The more I thought about it, the more curious I became, hence why I asked how others would view it.

Thanks for the response.

Btw, it's been some time since I've seen you around here. I hope all is well with you.

Nat

[astro]

Hi Nat,
Here's the way I do it (I trade with Oanda and have to convert the P/L numbers to pips manually because of their lousy transaction history):

1. Determine your "Base Lot Index" which is the % of the account you trade. So if trading X% of your account is 3 lots, then 3 is your "Base Lot Index".
2. In order to calculate the pips gained (relatively to the trade size) use the following formula:

Pips(adjusted) = Lots closed * Pips / "Base Lot Index"

In your example, you closed 1/3rd of your position at 20, 1/3rd at 80 and the rest at BE so you gained:
(1 * 20 / 3) + (1 * 80 / 3) + (1 * 0 / 3) = 33.3 pips

Note that if you multiply the result by the "Base Lot Index" you get the "absolute" pips: 33.3 * 3 = 100.

Astro

[bobnat]

Astro,

Thanks, that makes a lot of sense. I also use Oanda and I've complained about their accounting methods a few times...to no avail.

Nat

[peteuk]

Originally Posted by bobnat

I agree, only equity really matters in trading.

I ask because I know a guy who is selling signals and he ran into this situation last week and he asked me how I would count it. My initial response was basically the same as yours, but he needs to be able show something. From his perspective, his customers made money even though they got stopped out from the original entry and he wants to be able to say, "We made xx pips". And it makes sense in a way because he has no idea or control over how much equity his customers risk or win. The more I thought about it, the more curious I became, hence why I asked how others would view it.

Thanks for the response.

Btw, it's been some time since I've seen you around here. I hope all is well with you.

Nat

Very well thank you Nat, I hope all is well with you also. I see most of the old members have gone which is a shame.

Signal sellers usually have their own way of making things look good on paper but wouldn't 3 lots short from the same price be one trade? I guess another way of calculating it would be to average the + pips, +20 +80 +0 / 3 = 33, that way he could also express results in terms of a meaningful risk:reward.

Who am I kidding, ROI and R:R is not top of the list for most signal buyers (smile)

[cornellj]

Hi Bob,

In my business I make use of a standard lot size principle to ease the calculation.

In your example I would suggest the standard lot size to be one lot. If I entered 3 lots that would be 3 times the normal size. If I then calculate my pips it would be 1 lot made 20, 1 lot made 80 and 1 lot made nothing. On my standard lot size of one the pips would be 100.

If my standard lot size is 300 in one lot the pips would be 33.3 as calculated, the calculation is more difficult in this instance as more factors are involved.

I try and keep the calculations to the minimum and use a standard lot size approach and make trades in the standard or multiples of the standard lot size. The standard lot size is based on money management principles. If I have a position within a trade of three times the normal lot size the single pips made will be three times that of a standard lot over the same pipmovement.

I do not wish to add to confusion but found that using this approach eases the calculation of the number of pips profit made per trade and by extension per month.

Regards.

[bobnat]

Thanks for the feedback everyone. It's just like everything else in trading, you've got to find what works for you and stick to it.

Nat