I’ve just got a quick math question, that I can’t seem to figure out myself, so I’m hoping someone else could give some insight.
I always hear people saying something along the lines of “If you make ‘x’ amount of pips daily/weekly/monthly/annually, risking a maximum of ‘y’ % each trade, you’ll make ‘z’ % daily/weekly/monthly/annually.” I was wondering how this could be calculated so easily based on just a risk percentage per trade? Wouldn’t there be other factors involved as well? Such as lot size, stop loss in pips, average reward to risk ratio, etc.
I’d just like it to set a reasonable goal for myself as I begin to trade. Any help would be appreciated.
I think that you are right that there are too many variables to enable you come up with a standard number of pips to target each week/month, as they pip size varies from trade to trade. I simply risk the same percentage per trade (1% in my case, but views on that vary), so adjust my pip size so that the number of pips between my Entry and my Stop equates to 1% of my account size. I always target a minimum of 1% return per trade, trailing my Stop to lock that in, but obviously hope for trades to run longer than that. When I started out I targeted breakeven per month while learning, then 5% per month, and then targeted 10%+ per month once I felt I knew my way around a little more. Those levels worked for me and brought me along at a pace I felt comfortable with. I have never targeted a certain number of pips, as under the system I use the number of pips per trade varies wildly. For instance, I had a good trade at the end of last week with a 32 pip Stop, yet have on on the go this morning with a 102 pip Stop. I risked 1% of my account on each.
As the previous posted noted, you are correct to say you cannot turn pips/mo into %/mo unless you know the other variables. Moreover, just because you make positive pips doesn’t mean you make positive %.
Any help would be appreciated.