Average Pips move profit per day in FX Markets

Quote from JanaSergeevna:

But sadly this is often the case. People sometimes tell me about signalling services which have independently verified results over many months showing a few hundred pips per month of profit, but you need to look carefully at every trade made, remembering that the biggest drawdown is the one yet-to-arrive, and see what's really going on, working out the variability very accurately before leaping in with your desired position-sizing which might kill you off at some point.
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I never used signaling services, so I can't say...

Thats the problem with money management. Too aggressive MM can result in higher drawdowns, or account being wiped out. MM and the method should accomodate each other.

IMO... a less reliable method making 400 pips average per month isn't as good as a reliable method making 200 pips on average. Less reliable methods cannot take advantage of money management, where as a reliable method can take advantage of money management. Proper money management can produce very good performance... but a reliable method is required.

I'm sure there are different ways of looking at this, but this is the way I look at it though
 
Quote from Andy62279: IMO... a less reliable method making 400 pips average per month isn't as good as a reliable method making 200 pips on average. Less reliable methods cannot take advantage of money management
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Yes, I completely agree. I would far rather make half as many pips with twice the reliability (or half the variability, if you want to put it that way). One can always increase one's stake size. At the end of the day, it's not "pips" that you pay into the bank to cover all your bills.
 
Quote from JanaSergeevna:

Yes, I completely agree. I would far rather make half as many pips with twice the reliability (or half the variability, if you want to put it that way). One can always increase one's stake size. At the end of the day, it's not "pips" that you pay into the bank to cover all your bills.
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Yes, that's what I meant to say. Besides, I only have so much hair to lose. I have changed to a more reliable method this year. The balding process has slowed down.... but it's only time when genetics kick in and take the rest :(
 
Quote from Dave Floyd:

Good responses from Andy and Nick regarding pips/day. My experience has been, and verified by colleagues on the spot desks at Goldman and Bear that scalping FX, especially at a non-instituional level is next to impossible (yes I am sure some do it, we do not need to get into an argument), but my attempts at it early on were fruitless after having successfully scalped stocks for 10-years.

Andy indicates 300 pips a month, I think that is an honest and reasonable answer and reflects what my performance has been.

To me, FX is more of a way to leverage investment returns, not a trading/income vehicle.

Just my 2 euros!
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300 pips a month on average means a yearly gain of about 3600 pips. That would be about $36,000 gain per annum per 100k contract. My question is how much capital do you allocate to trade one 100k contract? Assuming you use a leverage of 1:10, are you then expecting a consistent yearly average return of 360%? Even if you use a leverage of 1:5, your return will still be 180% per annum. Since FX is a very liquid market and it is possible to get the same result using substantial size, that will put you in the elitest of the elites.

I am interested in finding from the successful forex traders here what kind of returns that they think they can reasonably achieve, assuming a leverage of 1:10, i.e using 10k yo trade 1 100 k contract.
 
Quote from LoosenUp:



I am interested in finding from the successful forex traders here what kind of returns that they think they can reasonably achieve, assuming a leverage of 1:10, i.e using 10k yo trade 1 100 k contract.
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an even better question is to ask what type of return you think is achievable and developing a plan to get there.

or work backwards... pick a method, setup, or whatever and develop rules so that idea can make the most ticks possible. Then develop a money management that can take full advantage of the performance of your method, then you can see what type of returns are possible.
 
Last week I booked 17 trades.....12 wins....5 losses for 142 pips on the week trading one lot....I was happy although I left a lot of money on the table due to evercaution....(and reliving some of my past disasters).....another six months of getting it right and I will move to bigger lot sizes....but to me it is as important to develope a wining record of profitable small wins as it is to hit the odd very elusive homerun. Nearly all URO/USD
 
Quote from LoosenUp:300 pips a month on average means a yearly gain of about 3600 pips. That would be about $36,000 gain per annum per 100k contract. My question is how much capital do you allocate to trade one 100k contract? Assuming you use a leverage of 1:10, are you then expecting a consistent yearly average return of 360%? Even if you use a leverage of 1:5, your return will still be 180% per annum. Since FX is a very liquid market and it is possible to get the same result using substantial size, that will put you in the elitest of the elites.
I am interested in finding from the successful forex traders here what kind of returns that they think they can reasonably achieve, assuming a leverage of 1:10, i.e using 10k yo trade 1 100 k contract.
More...
I understand of course that your question is to Andy and not to me, but it gives me the opportunity (if nobody minds) to ask about this "leverage". I do all my FX trades by spread-betting (because I live now in the UK and spread-betting returns are completely tax-free) and don't use "direct access" so I don't understand "leverage". To me, 300 pips per month is £3,000, at £10 per point. To open a spread-betting position of £10 per pip with a 25-pip stop-loss, for example, I must have in my account at that time a minimum of £250, that is all. Can someone explain how this equates with the leverage of a direct access trade using a broker such as Oanda or whoever? Apologies if I am asking in the wrong thread!
 
http://www.investopedia.com/terms/l/leverage.asp

Leverage
What does it Mean? 1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

2. The amount of debt used to finance a firms assets. A firm with significantly more debt than equity is considered to be highly leveraged.

Investopedia Says...
1. Leverage can be created through options, futures, margin, and other financial instruments. Leverage increases one's risk.

For example, $1000 could be invested in 10 shares of Microsoft stock, but to increase leverage, $1000 could also be invested in, say, 5 options contracts to increase one's control to 500 shares.
------------------------------

Leverage is basically being able to do more with less. I use 100:1 leverage. So 100 pips is equal to $1,000 USD. There are some fx dealers that offer 400:1 leverage. So 100 pip is equal to $4,000 USD. It won't take many losing trades to wipe out an account using 400:1 leverage. Some people think of the same thing about 100:1 leverage. If you have large enough beginning balance, and starting with a minimum of 1 lot, as I am, then it really doesn't hurt the account that much.

If someone is using 50% of their equity for margin.... 5 lots from a 10K account, it'll only take 200 pips to get wiped out. Not much room for error. There's a balancing act IMO. Use as much leverage as possible to make the most... but small enough where your system can encounter a large drawdown without taking a chunk out of your account.

Money Management is the most important part of a system. It can turn an average system into a very profitable system, or turn a very good system into a losing venture.

There's no shame in 1 lot. Due to my capital and system's performance, 1 lot is where I'm supposed to begin. I just have to let the system work it's course and let it make money reliably. Then once my account reaches a point where Money Management starts kicking in... that's like the turbo spoolin up and slamming fuel into the engine. It's good stuff. But if you use too much boost (leverage) you can blow your motor :(

As far as the prior post about % returns. I just started trading this new system at the beginning of the new year, but as far as the performance I have recorded from testing... your estimates sound about right, but you have not included the performance of money management.

I didn't want to answer your question because I don't think it has much importance. If I told you 100% return, or 1,000% returns were possible. What would you do with that information? There is nothing you can get out of it. To know that it's possible? There are books and articles that prove such endeavors. You don't need confirmation from some stranger posting at a forum. A better question is to ask yourself how can you make 100% or 1,000% returns consistently. You will find more constructive results with that thinking, imo.

Andy
 
Thanks very much for your helpful explanation, Andy. I have an account with FXCM which I have never learned to use properly, I really must try their demo account and familiarise myself with the details. To someone used to spread-betting it's not at all easy to work out quickly (for example) what position-size in dollars equates to a spread-bet of £10 per pip on the EUR/JPY. I suspect that for people used to direct access dealing (who, unlike me, have to pay tax on their annual profits) find this sort of thing very easy to work out. Suppose I will get used to it eventually. (Sometimes I want to do a trade which my spread-betting firm does not have available, so I must master this somehow!).
 
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