# % Gain Question

Hi ALL !

HERE IS MY QUESTION:

I saw a member gained 2200% gain on Etoro. Does this mean if I had invested \$1000, I would have got made \$22000 ?

Can a member please explain these gains formula ?

You have it correct. Pct return is gain/investment.

So here is an example:

Account Size: \$1000 USD
Risk % Per Trade: 50% (\$500) (just an example)
Leverage: 500
Total Units: 250,000 EUR (\$500 x 500 leverage)
Pips Gained: 350 pips
Pip Value: \$25
Total Profit from Trade: 350 pips x \$25 pip value = \$8,750
Gain % = \$8,750 divided by \$500 = 1750%

Is this correct ?

Pip Value

No. You donâ€™t calculation your return based on the amount of margin used. You calculate it based on your account equity, so cut your % in half for this example.

So it would be \$8,750 divided by \$1,000 = 875%

Many many thanks

It has to do with the leverage. If you trade 100:1 than every tick is about 1% gain and with 500:1 even 5 %. It is more important to count the pips than \$ to get a performance idea of a system.

No, itâ€™s more important to count % returns because pips alone donâ€™t tell you squat.

Exactly, you can end up making money but losing pips overall, hence thatâ€™s the state of my own trading account this month to date.

Cough Averaging down never made anyone any money.

This is the dominant belief in the Forex industry. I donâ€™t blame you. Lol. But I love when people show off by telling people how many pips they made in the last â€śxâ€ť amount of time.

That is interesting. Can you eleborate on that. Because it makes no sense what you are saying. % returns are influenced by the pip value, that (among other) increases with the leverage used. Pips is objective.

I can say to you that my system had a 2200% return in a year, and you would think WOW, where it is overleverage and the return is actually 2,2% is you use normal leverage.

Its the pips that make the \$ counter keep moving, not how high you value the pip.

Clark,

Thank you for your comment. And I am eager to learn here, because Rhodytrader said something similar, but it is in both cases not explained. So I hope you can help me out here.

1. I agree I misread the original post, which was more about what it means if somebody made 2200% in terms of money.

2. I disagree that pips should not be used to measure system performance.

if I have 1000 and trade it 1:1 and make 100 pip, I would have a 10 gain, or a return of 1%.
If I would have traded 500:1 and also made 100 pip, I would have a 5000 gain, or a return of 500%.

I still made 100 pip! How does the pip not say something about the system? You still need to make pips to keep the meter running. How you value the pip (leverage) is in my vision not part of the system.

In my opinion there is a big differende between:

a. Woopie! I made 2200% in one month as I made 40 pip!!!
b. Woopie! I made 2,2% in one month as I made 1000 pip!!!

I would be more interested in system (b), rather than (a). Wouldnâ€™t you?

Leverage has nothing to do with the return on your account.

A true 2,200% using 1:100 leverage is just as good (equal to) 2,200% using 1:1 Leverage. - You would still have a 2,200% increase on your deposit amount regardless of the leverage used.

You can make a gain of 100pips and make 10% from doing so
You could also make a gain of 100pips and lose 20% of your account
(you can insert any percentage figure into the above, it makes no difference)

Pips do not mean profitâ€¦at all. Yes pip are related to profit, but what matters more is the financial lot size attached to each pip.

Look at this for an example.

You made 100 pips in a single month Net (the month end result)
During the month you made 200 pips
During the month you lost 100 pips
â€”this is how you got your net +100pips at the month end.

Now you would assume that this is a good month, you made a pip profit. But the question is this "did you make a financial profit in \$'s "

1. You lost money

>Assume your 200pip gains was at \$1 per pip (+200 x \$1 = +\$200.00)
>>>Assume you 100pip loss was at \$5 per pip (-100 x \$5 = -\$500.00)
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>-\$300.00

>Assume your 200pip gains was at \$5 per pip (+200 x \$5 = +\$1000.00)
>>>Assume you 100pip loss was at \$1 per pip (-100 x \$1 = -\$100.00)
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>+\$900.00

So, in both of the above examples you made pips, and im not even looking at Leverage, thatâ€™s 100% irrelevant, it has nothing to do with ROI. It simply implies what size trade you can hold with direct respect to your account balance.

Hope this helps.

Jezz

p.s. one of my trial accounts is a real example of this. Over the past six weeks my pip count is a NET -55â€¦â€śoh no - this must be badâ€ť. But my account is up +19.60%

Leverage only determines the amount of margin required to enter into a position of â€śxâ€ť amount position. Obviously, at a higher leverage one is able to trade with bigger volumes. Ex) 100 shares vs. 10000 shares. A \$0.01 move will be of different value for the different volumes, obviously. I use stocks because it easier to visualize whereas forex lots may be a bit more conceptual. So your example of higher returns on higher leverage is absolutely correct. But ask yourself, WHY does it work? And thatâ€™s what my explanation just answered.

So boasting about pip count means nothing to me.

Of course, the only exception is if both traders used a fixed lot money management system where they each trade with the same fixed number of lots per trade. Then, the trader with the more pips wins. But they also risk the chance of losing more, assuming his or her stoploss is equally as large.

Hope this helped.

Clark,

Thank you for your answer, I appreciate it a lot because I think a discussion will help other traders to make up their own mind. I think that we do agree on the pips.

If both traders would use a fixed leverage (2:1), you are right. Than you can say which system is more profitable without knowing the pips. But that is something we didnâ€™t know, he could be trading 500:1. So we cannot conclude that.

As it only said 2200% in return (what you see a lot, thats why I spend some more time on it) without knowing how many pips or leverage involved, we donâ€™t know how able he is to catch pips. and pips are the drivers for our trades.

Each pip to me means another unit \$ profit made or lost. So I want to know how many units a system makes (performance) so I can vlaue it with my own money management rules instead of his. Therefor how he valued each pip or how much % return he is having is not important to me. I want his system if he makes a lot of pips, I donâ€™t want his money management rules.

As I trader I donâ€™t say â€śOkay, I put my stoploss is at a -\$50â€ť, that would be silly because it could be too close or too far from my entry to be effective. I would say â€śOkay, I put my stoploss at 30 pipâ€ť. Why? Because you see a stoploss level that is a certain amount of price units (pips) below your entry and you think that would be a good moment to exit the trade. If so, why would you base the performance of the trade based on the money or % return made?

You would say, I risk 2% of my equity (leverage = 50:1). Letâ€™s say that would be \$10,000 :). Youâ€™ll put your stoploss at a certain level and calculate your lotsize to not exceed that 2%. You take the \$10,000 (or your system does that) and divide it by the number of price units the stoploss is away from your entry. This gives a dollar value per price unit and based on that you calculate your lots. So he calculation is based on the number of pips and those pips also influence your % return because your return is based on your lotssize and the pips made in that trade.

So therefor are the pips more important to me. It is also up to me not to overvalue the pips because when managed poorly, you can still make a loss with a positive number of pips. We donâ€™t know how his momeny management is when he only mention 2200%. We only know he made pips, and I want to know how manyâ€¦

So that is my case to respect the pip countâ€¦

Hi Clark !

Thanks for your reply and time. I will discuss something you discussed.

You said leverage â€śonlyâ€ť has to do with margin. I thought the same previously.

If leverage has only to do with margin required, then why Oanda has shown on this page, that with higher leverage gain in magnified ? Link is here: Margin and Leverage | OANDA fxTrade Europe

EXAMPLE 1:

\$2000
x 20:1 leverage

If trade moves up 100 pips
Unrealized profit is \$400

If trade moves down 100 pips
Unrealized loss is \$400

EXAMPLE 2:

\$2000
x 50:1 leverage

If trade moves up 100 pips
Unrealized profit is \$1000

If trade moves down 100 pips
Unrealized loss is \$1000

Do you think they are wrong ?

Can you please explain with an example why leverage doesnâ€™t magnify gains?

See this: Example A

Account Balance = \$997.90 USD
Leverage used = 10 (total leverage available is 50)
Pair = USD/JPY
Units = 9,979 units of USD
Pip Value = \$1.23
Pips gained = 50
Profit from Trade = 50 pips x \$1.23 = \$61.50

Gain % = (\$61.50 / \$997.90) x 100 = 6.16%

Attached pic:

See this: Example B

Account Balance = \$997.90 USD
Leverage used = 20 (total leverage available is 50)
Pair = USD/JPY
Units = 19,958 units of USD
Pip Value = \$2.46
Pips gained = 50
Profit from Trade = 50 pips x \$2.46 = \$123.01

Gain % = (\$123.01 / \$997.90) x 100 = 12.33%

Is Oanda wrong or may be my calculations ? Please post back. Looking forward to hearing from you.

Higher Leverage just means you can trade MORE per PIP should you decide too with respect to the same account balanceâ€¦

How many people have to say the same thing, lol

And thereâ€™s my point exactly.

You can be a losing trader while having a positive pip count, and you can be a winning trader with a negative one. If someone says â€śI made 15% last month,â€ť then we know for certain (assuming heâ€™s not just flat out lying to us) that he traded profitably. We cannot say the same for certain if someone says â€śI made 150 pips last monthâ€ť. And even if we could say that meant he was profitable, without knowing the exact size of each trade we donâ€™t know how profitable.

The bottom line is we want to grow our equity, which is expressed in currency not in pips.

Of course both metrics suffer from a lack of risk comparison, which is why it helps to talk in terms of risk units - R. If someone says they made 10R last month youâ€™d know they made 10x their average risk. Youâ€™d still need a % return figure to sort out what that means in real money (so to speak), but at least youâ€™re getting into a better frame for comparison.

:o How is that possible ? :o

Read the example i posted, itâ€™s black and white

Do we have to ram these threads down peoples throats or what, all you have to do is read the answers.