% Gain Question

[Shawn_Michaels]

Read the example i posted, it’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.

Your point may be valid, but I am afraid your attitude is not useful. Thanks for your reply.

[rhodytrader]

:o How is that possible ? :o

Very simple example, and probably one I’m sure a few folks can relate to:

You do 5 mini lot trades in EUR/USD and average a 50 pip gain on each, for a total of $250 (5 x 50 x $1). Thinking you’re on a roll, you decided to raise the stakes and do a full lot on the next trade and lose 30 pips, or $300. That nets out to a 220 pip gain (5 x 50 - 30), but a $50 loss ($250-$300).

[jonnyrich007]

This discussion only proved that stats lie. Only thing that matters is the increase of your balance or decrease of your balance. PIP counts is meaningless and so is percentage increase arguments. Just show me what you deposited initially and when and what your current balance is. Nothing else matters. And be honest if you deposited additional amount every week or every month which the “stats” you spew won’t show obviously.

[ClarkFX]

Leverage only means you can trade MORE VOLUME. So OBVIOUSLY you can make more if you trade larger…

Agree to disagree I guess.

[MoneyNVRSleeps]

I think Leverage has the same influance on the mind as stop losses do…

What makes you think, that this 1 trade is worth more then the last, with the same effort put forth?

You must hit EVERY trade, with the same authority, EVERY TIME…

[Shawn_Michaels]

Hi Rhody !

Thanks for your reply. Yes I got it now

[rhodytrader]

This discussion only proved that stats lie. Only thing that matters is the increase of your balance or decrease of your balance.

If you replace “balance” with “equity” you’re closer to hitting the mark. An account balance can grow without equity also doing so if a trader closes out profitable trades but holds on to losing one.

PIP counts is meaningless and so is percentage increase arguments. Just show me what you deposited initially and when and what your current balance is. Nothing else matters. And be honest if you deposited additional amount every week or every month which the “stats” you spew won’t show obviously.

You’ve just described here % return (change from one balance to another over time). If done properly, then % return will reflect performance (though not risk-adjusted without some further work), accounting for deposits and withdrawals. If not done properly, then of course it’s entirely meaningless.

[jonnyrich007]

No. Equity argument is also invalid. Only the final ledger balance matters. Floating trades are also irrelevant. Only final balance matters. Not equity. I would like to assume that we are all traders here, not gamblers. I trade with tight TP and SL so equity argument is irrelevant since most of my trades are over within one hour.

[ClarkFX]

No. Equity argument is also invalid. Only the final ledger balance matters. Floating trades are also irrelevant. Only final balance matters. Not equity. I would like to assume that we are all traders here, not gamblers. I trade with tight TP and SL so equity argument is irrelevant since most of my trades are over within one hour.

Wow a little testy here.

[rhodytrader]

No. Equity argument is also invalid. Only the final ledger balance matters. Floating trades are also irrelevant. Only final balance matters. Not equity.

Since equity represents the money you actually have available to withdraw (less any margin requirements, of course), it is more relevant than cash balance.

I would like to assume that we are all traders here, not gamblers. I trade with tight TP and SL so equity argument is irrelevant since most of my trades are over within one hour.

I have no idea what this has to do with the first part, unless you’re making the point that your short horizon essentially means that at the end of any given day cash and equity are equivalent. That’s great for you, but it’s not the reality for everyone.

[system]

And there’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 “I made 15% last month,” then we know for certain (assuming he’s not just flat out lying to us) that he traded profitably. We cannot say the same for certain if someone says “I made 150 pips last month”. And even if we could say that meant he was profitable, without knowing the exact size of each trade we don’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 you’d know they made 10x their average risk. You’d still need a % return figure to sort out what that means in real money (so to speak), but at least you’re getting into a better frame for comparison.

Rhody,

I do not care if the person made a profit with his system. I only want to know how many units he produced. For how much I trade each unit is up to me. I prefer to know that he made 150 pip, preferably consistently over a period of time. Then I look if I can come up with money management rules to make it profitable. But I do not see both as one system. It is like you by the same car as your neighbour,because he likes it, but I am going to drive it differently than he does.

This is my opinion, and I just want to push a bit back against the strong replies i received. This way other readers can make up their own minds. More helpful than just saying that it is rubbish to look at the pip performance.

Lets leave it at this. I am sure we could continue till the end of days…

[rhodytrader]

I do not care if the person made a profit with his system. I only want to know how many units he produced.

You’re basically talking system comparison rather than trader comparison. To that end, I would agree that pips are useful, though you do need some metric to account for risk variations. If just trying to figure out who’s trading better, though, then I stick to my view that pips just can’t get the job done.