Hello,
I have problem figuring out how to convert pips into percent gained/lost of account. What if someone says that he made 1000 pips in a month, so what percent of his account increased or decreased in that month?
Or what if someone claims that he makes 200 pips per day. So by what percent his account appreciates each day?
Please answer with examples so that I may understand clearly.
Please help 
% gained or lost has nothing to do with the amount of pips someone has gained or lost, l shall explain:
there are three factors needed to determine the money gained or lost by a trader
for instance lets say i trade an EMA cross system that has a win rate of 50%, that is the first piece of the puzzle
And with this system i set my stop loss to 25 pips and my take profit to 50 pips (meaning i have a risk reward of 1:2, meaning for every dollar i am risking i am trying to gain 2)
And with every trade i set my lot size to 5% of my account size (meaning if i have a $1,000 account i will risk $50 per trade, ie 5%), so if i had a $1,000 account i would trade with .2 lots per trade (because 5% of $1,000 is $50 risked per trade, so each pip of my stop loss which is the most i can lose needs to be worth 2 dollars)
so my W/L is 50%, my RR is 1:2, and i risk 5% per trade, so lets say i make 50 trades in a month
i win 25 trades and i lose 25 trades, each loss i lose 5%, and each win i gain 10% (because i risk 5% per trade and i aim to make double that on my wins, ie 10%), so my wins bring my account up 250%, and my losses bring it down 125%, meaning at the end of the month i am left with a profit of 125% my total account size
Hello, Maira, and welcome to this Forum.
In order to calculate the percentage gain in an account due to a particular pip gain, we need more information.
Letās use a dollar-denominated account as an example. And, to keep things simple, letās say that the pip gain we are discussing represents the gain on a single trade. For example, SHORT 3 mini-lots of EUR/USD for a gain of 200 pips.
In addition to the pip gain, we need to know the dollar-value of one pip (which we can figure from the information given above), and we need to know the personās account balance. Letās say that this traderās account balance (prior to this trade) was $5,000.
Now, we have the required information. The calculation would be done this way: In a dollar-denominated account, the pip-value for the EUR/USD is $1 per pip, per mini-lot. This trade involved 3 mini-lots. Therefore, the pip-value for this trade is $3 per pip. The trade netted 200 pips in profit, which is worth $600 total for the trade.
$600 Ć· $5,000 = 0.12 =12%, which is the percentage gain you wanted to know.
That calculation was easy enough (given the necessary information), because it was based on just one trade. But, what if the trader made a total of 15 trades ā some of them winning trades and some of them losing trades ā in various currency pairs, with different position sizes, over a period of 1 week, with a net gain for the week of 200 pips. How would you figure the percentage gain in the account over that 1 week period, resulting from that 200-pip gain?
This becomes a huge bookkeeping chore, because you have to make 15 separate calculations (like the one we did above for the individual trade), total the dollar gains and losses for the 15 trades, and divide this total by the account balance prior to the first of these trades.
To make matters even more complicated, itās likely that the various currency pairs traded in this example have different pip-values, which would have to be separately determined. (The EUR/USD, USD/JPY, and USD/CHF, for example, all have different pip-values).
As a general rule, when you hear someone say that he/she made x-number of pips on a particular trade, you simply will not know what that pip gain amounts to in dollars. And you simply will not be able to calculate the percentage gain in that personās account.
Thanks a lot for such clear illustrations. I fully understood it
Few more questions:
In currency trading, nothing happens until some pips are gained.
Price movement, measured in pips, is what we speculate on. If you like more direct language, itās what we BET on.
How much money you earn betting correctly on a price move depends on (1) how big a price move you capture, and
(2) how big a bet you placed on that price move.
If you have the mistaken idea that pips are some sort of imaginary unit of measurement, allow me to correct you.
A pip is a unit of price. When you look at the current quoted price for a currency pair, you are looking at [B]a price[/B] in dollars, or euro, or sterling, or yen, etc. And the last (or next to last) digit to the right in that price is a pip, which is a fraction of that price.
Example: letās say the current price of the GBP/USD pair is 1.56789 (just to make up a number). What does that six-digit number mean? It means that, right at this moment, Ā£1 = $1.56789. Thatās one dollar, fifty-six and a fraction cents. The fraction, 0.00789, is 78.9 pips. So, in this pair, one pip is a fraction of a U.S. dollar.
In the USD/CHF pair, one pip is a fraction of a Swiss franc. In the EUR/GBP pair, one pip is a fraction of a British pound.
If you and I each earn a [B]50-pip profit[/B] trading the EUR/USD, we may or may not have earned the same [B]dollar-profit.[/B] That depends on your position size and my position size. If your position was 10 standard lots, and my position was 1 micro-lot, then you earned $5,000 on your 50-pip gain. But, I earned only $5 on the same 50-pip gain.
Suppose someone asked you how much the EUR/USD went up, and you said āIt went up $5,000.ā And then that person asked me the same question, and I said āThe EUR/USD went up $5ā. What a ridiculous conversation. Itās like weāre all speaking different languages.
On the other hand, if you said āThe EUR/USD went up 50 pipsā, and I said āThatās correct, it went up 50 pipsā, then our conversation makes sense, because we have a common unit of measurement for price moves ā pips.
To go back to where we started, nothing happens until some pips are gained.
Fasten your seatbelt. This may be a bumpy ride for you.
In this market (the retail spot forex market), we do not buy or sell any currency, or any currency pair, at any time. Period. There is no buying or selling. Furthermore, there is no money-lending. When you trade on margin (using leverage), your broker does not lend you money. Nor does anyone else lend you money in this market, ever. Period.
If those concepts are new to you, then you need to study them and work with them, until they become part of your brain.
You will constantly hear forex traders talking about buying and selling. I even use those terms myself, from time to time, because itās easy and Iām lazy. But, itās not accurate. And, to the extent that it misleads newbies, I shouldnāt do it. Youāll even hear some traders try to explain that in a forex trade you buy one of the currencies, and sell the other one. Rubbish. Thereās no buying or selling of currencies in the forex market.
So, if we donāt buy anything, and we donāt sell anything, just exactly what do we do?
We speculate on price moves. Or, as I prefer to say, we bet on price moves. When you place a bet, you donāt have to own the thing you are betting on. If you go to the racetrack and bet on a horse, you donāt have to buy the horse ā you just plunk down your $2 (or whatever) and make your pick.
Itās the same in the forex market. In order to go LONG or SHORT (what the un-informed call ābuyingā and āsellingā), you donāt have to own any of the currencies involved. You just speculate (bet) on how [B]currency A[/B] is going to change in price compared to [B]currency B.[/B]
If you have a dollar-denominated account, then everything is done in dollars: Your balance, equity, margin used, available margin, and your profits and losses are all stated in dollars ā regardless of the currency pairs you are trading.
Think of it this way: Your bets are all placed in dollars. And, when you win, your profits are paid to you in dollars.
Great response post Clint, thank you for doing so. really good explanation to break down the idea behind speculaltion and the myth of the ābuyā and āsellā terminology.
In Forex markets almost 90% of the trades are speculative in nature. This means that we have actual trades which involve transfer of currency to less than 10%
As I understand the question raised in the original post, Maira was asking how to determine the percentage gain in [B]someone elseās account,[/B] based on [B]that personās[/B] claim of pips gained.
If that [B]other person[/B] furnishes enough additional information, it is possible to calculate his/her percentage gain.
But, most traders do not routinely post their private financial information on the internet. So, in most cases, if someone tells you simply that he/she made x-number of pips on a trade, you wonāt be able to translate those pips into a dollar-profit figure.
On the other hand, if that person also tells you the position size involved, then you can calculate the dollar profit; but, you wonāt know the percentage increase in that personās account.
Finally, if that person were to tell you (1) pips gained, (2) position size, and (3) account balance prior to the trade, then you could calculate the percentage gain in the account.
If the pips which were gained resulted from a number of trades ā especially a number of trades of different sizes, in different pairs ā then your calculations would become the ābookkeeping choreā that I referred to in my previous post.
In the case of [B]your own account,[/B] your trading station allows you to download a detailed account report anytime, with a few clicks of your mouse. This report gives you complete information on every trade, every deposit, every withdrawal, and every interest credit or debit, for the specified report period. And it gives you starting and ending account balances, plus details of any positions which happen to be open at the time the report was prepared.
With all that information spread out in front of you, itās just a matter of a few minutes with a pocket calculator to figure net P/L per day, per week or per month, and to calculate a percentage gain/loss in your account for a particular trade, for a particular set of trades, for a given day or week, etc.
As for keeping a journal, Iām the worst person to ask. I simply donāt spend time recording information that I can download from my trading platform. Iām not suggesting that my way is the best way ā itās just my way.
Well, that 90% figure may or may not be accurate, depending on which slice of the currency market you are referring to. Would you care to cite your source for that figure?
Hereās how the overall market is divided (figures taken from the BIS 2010 Triennial Survey, and rounded):
ā¢ [B]$4 trillion per day traded in the worldwide foreign exchange market[/B]
(this total includes the spot currency market and all of the various currency derivatives markets)
ā¢ [B]$1.5 trillion per day traded in the spot currency (forex) market[/B]
(this is 37.5% of the overall currency market)
ā¢ [B]$1.365 trillion per day traded in the institutional spot forex market[/B]
(this is 91% of total spot forex, and 34.1% of the overall currency market)
ā¢ [B]$0.135 trillion per day (= $135 billion per day) traded in the retail spot forex market (our market)[/B]
(this is 9% of total spot forex, and 3.38% of the overall currency market)
Which segment of the overall market are you referring to?
I donāt think that statement can be supported. For the sake of discussion, letās assume that your 90% figure, above, is correct.
Assuming that ALL [B]non-speculative[/B] currency transactions involve real money transfers, then the question becomes what portion (if any) of [B]speculative[/B] currency transactions also involve real money transfers.
The largest speculative trades occur between mega-banks at the interbank level of the market, and those trades absolutely are booked as real money transactions.
And, large hedge funds, large private equity funds, and high-net-worth individuals who have direct access to one or more of the banks in the interbank network also do speculative trading, and their speculative trades are booked as real money transactions, as well.
So, at least a portion ā and possibly a very large portion ā of speculative trades [B]do[/B] involve real money transactions (what you referred to as ātransfer of currencyā).
Again, would you care to cite your sources?
What is the minimum data I need for calculating only the % gain per month from a PIPs gained per month?
I do not need to know the size of the account or the lot-size or risk taken. Why would traders say āI made x pips this monthā instead of saying āI grew my account with x percentā?
B[/B] If you are trying to calculate the metrics [B]in your own account,[/B] you can calculate your percentage gained (or lost) per day, per week, per month, etc. [B]directly,[/B] without even thinking about pips.
[B]% = (B2 - B1) Ć· B1 [/B]
in which ā
% is the percentage gained (or lost) in your account during the period (day, week, month, etc.)
B1 is your account balance at the beginning of the period (day, week, month, etc.), and
B2 is your account balance at the end of the period
Note: if B2 - B1 is a positive number, then the [I]percentage gained[/I] is being calculated; if B2 - B1 is a negative number, then the [I]percentage lost[/I] is being calculated.
B[/B] If you are trying to calculate the metrics [B]in someone elseās account,[/B] I have to ask you ā
Why are you obsessed with someone elseās personal finances?
Pips have to be gained, before dollars (or euro, or yen) can be gained.
If someone shows you a method for capturing half the pips (or more) in a price move, that person has given you a way to make money in this market. How you apply your available capital, and how you handle your personal money management, will determine how you translate pips gained into dollars gained (or euro gained, or yen gained, etc.).
Your ability to trade will be reflected in pips gained.
Your ability to make money and create wealth will be reflected in your money management. Worry about your own, not some other traderās.
In [B]most[/B] cases, because they want to brag about their trading prowess, without divulging any personal financial information. And in [B]most[/B] cases, they are blowing smoke.
Clint: thanks for the well balanced answer. I care less of what others do as most blow up their account and make no money. I am trying to figure out (for the remaining forex traders) what kind of average return they make per month. I talked to Anna Coulling and she says 50-100 pips per month is reasonable. I asked Marc Boardman and he states that he makes in between 10-20 percent in average per month. I know that nobody can tell me what I will make as only I can achieve that. I am just trying to find a reference as to what āin generalā is possible and reasonable for most traders that survive and consistently trade.
Very interesting. Itās a shame that this information isnāt mentioned in a Forex 101 type of course. Lately, I was thinking that maybe Iām not actually buying or selling actual currency especially after the Swiss Franc disaster with FXCM. Iām still a newbie trader and Iām not totally sure all this works. Correct me if Iām wrong, but would it be correct to assume for example with FXCM USA, that our āspot forex positionsā are basically spot forex CFDs (derivatives). I know that FXCM UK offers CFDs on equity indices, and commodities which isnāt available to US traders. I read somewhere that CFDs positions are ārolled overā daily just like our spot fx positions are rolled over daily and we either get a rollover credit or debit.
With FXCM non-dealing desk model, I was under the assumption that I was trading directly with the interbank market. How does FXCM liquidty providers factor into this?
Can you provide some links to reading material or maybe explain other concepts of how it really works in retail spot fx.
I can.
But, right now, Iām going to watch [I]The Blacklist,[/I] and [I]Allegiance.[/I]
After Iāve had my t.v. fix, Iāll get back to you.
Thanks Clint,
I found a thread titled, āAre we really trading spot forexā from June 2014 in which you gave a great explanation of the inner workings of retail fx.
I trade with FXCM. So my other questions would be ā¦ are their quotes ā¦ really actual quotes from their liquidity providers aka big investment banks now that they are on a commission model instead of a spread markup model?
Now that I understand that retail fx makes up less than 4% of the fx market and that our impact is of no consequenceā¦ when Iām viewing fx candlestick charts, over 96% of the price action is ALL institutional - banks, hedge funds, private equity, sovereign wealth, central banks.
I prefer not to trade intraday time frames (less than 4 hours) because they are much more trickier to trade. It seems like the intraday time frame is a whole 'nother beast apart from daily, weekly, and beyond.
Since retail isnāt really represented in the charts, is it a misnomer to say that the banks are āstop huntingā retail? And if thatās the case, then banks in the short term are manipulating prices against their institutional clients and other banks?
While daily, weekly, and longer time frames ultimately follow the fundamentals, would there be some truth in saying that the intraday time frame more closely resembles an auction with the banks as the auctioneers moving prices up and down on the supply and demand (unfilled orders) of institutional clients?
Good, you found the thread I was going to refer you to.
Iāll let FXCM speak for themselves. See this FXCM webpage ā Forex Pricing - FXCM
Note that FXCM states: āUnlike many other forex providers, we do not markup the spreadsā¦ā
That statement is essentially correct. The price action you see on your charts is the price action that we ā retail traders ā are following, or reacting to. It is [B]not[/B] price action generated by our piddly little trades.
The shorter time frames are more driven by technicals than by fundamentals. In their constant search for liquidity, the banks (as market-makers) drive prices up and down over the short term. These price movements (manipulations, some would call them) are most evident on the short-term charts. Many traders refer to this phenomenon as the market-makers āleaving footprintsā.
The longer time frames are more driven by fundamentals than by technicals. The banksā short-term manipulation of prices ā driving them up or down in order to fulfill liquidity requirements ā tends to get absorbed, and go largely unnoticed, in the larger price patterns on the longer time-frame charts.
Where is the dividing line between longer time frames and shorter time frames? Most likely around the 4-hour time frame, as you have indicated.
Banks drive prices toward the pockets of liquidity which they need in order to fill orders, and keep their own books in balance. If your protective stop-loss is sitting in one of those pockets, then you are at risk of getting picked off.
The bank gobbling up your stop-loss isnāt after your few-dollars-worth of liquidity ā theyāre after the big bucks, which basically means the institutional orders resting at key levels. You, as a retail trader, are simply collateral damage.
The big banks are [B]market-makers,[/B] which is very different from being auctioneers. But, your description of how banks push prices around is essentially correct.
If you havenāt watched this series of videos, you should do so. These videos, produced by an investment bank insider, reveal a lot of the inner workings of the market, which you are asking about ā
Anton Kreil ā Professional Traders Vs Retail Traders 101
Part 1 ā YouTube
Part 2 ā YouTube
Part 3 ā YouTube
Part 4 ā YouTube
Anton Kreil ā Professional Traders Vs Retail Traders 102
Part 1 ā YouTube
Part 2 ā YouTube
Part 3 ā YouTube
Part 4 ā YouTube
In 101-Part 1, Anton mentions how quiet (and boring!) the typical bank trading floor is. When youāre listening to his description, try visualizing this trading floor ā
The UBS trading floor in Stamford, Connecticut ā the worldās largest securities trading floor.
.
It is easy to convert pips to percentage gained/lost but usually, traders will determine percentage of profit or loss to take and then you will determine about lot size to use and target to reach in pips or amount of dollars to risk. Example : I had capital $100 and I want to risk 5% in each transaction so I risked $5 in single transaction. If lot size which i used 0.1 lot = 10 cents/pips so I will set Stop Loss 50 pips in each transaction to risk 5%.
This is where you lost me. Can you please elaborate how did you come to that number .2 (lot size) what did you calculate to get to that lot size?! Thank you so much
Blockquote
For that youāll have to look into the percentage of your account that is at risk per trade. Information on the currency pair in question will also be needed for a precise calculation.