Thoughts on minimum pip gain benchmarks/standard

Trading Systems
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Hello community, I’m a beginner FX trader here. Pls your opinion: We have 1:2 RR as a good and standard reward to risk ratio, so now with a good 1:2RR what number of pip gain would you consider standard if you were to select quality trades only.

…in other words, is 43 pip gain and a 1:2 RR trade setup good to take? Quality-wise, what minimum pip gain would you benchmark on and why. Or do you even consider this at all in your trading?

PS:I know all this benchmark figures should not necessarily be a MUST-rule written on stone, I just need a frame to think from and adapt it to what works best for me.

Thank you all so much in advance for your quality contributions

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Pips are very different from pair to pair. I define my risk and my profit targets in terms of multiples of ATR, and to make things more probably profitable I avoid the very low volatility pairs.

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Alright thank you for your input tommor.
However, I don’t know much about ATR, let me go google and learn so i can understand you better.

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ohhh i get it now. (ATR= Average True Range)

ATR is much of an indicator, my question about pip gain was more towards better risk management and selecting QUALITY trades only

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my answer starts with an apology! i know i can sometimes across in the forum as “criticizing”, and i’m sorry if that’s how this post comes across - it’s intended only helpfully! :blush:

this is a strange (and in my opinion misguided) starting-point to discuss what you want to know

there’s no “number of pips” i’d consider, because that’s not a useful parameter for me

nor for anyone else, actually

anything like this needs to be volatility-related (as @tommor has wisely said, above)

a pure “number of pips” isn’t volatility-related; a fraction of ATR is volatility-related; a multiple of ATR is volatility-related; lots and lots of other parameters are volatility-related and any of them is better than “a number of pips”

impossible to answer intelligently or helpfully without knowing the volatility

(but starting by defining the RR makes it very weird anyway)

absolutely

you’re totally right about that: that’s exactly what you need to do

but don’t let it be a framework that starts from “a number of pips”: that approach will not (and cannot) help you, just like it doesn’t and won’t help anyone else either

and while you’re still here, i’ll tell you something about RR as well, in case it helps you either now or in future: overall, in forums (not just this one!) there’s an inverse proportionality between “how good/successful/longstanding the members are” and “what they think is generally a reasonable RR for beginning traders”

longstanding members who are making a living from trading think that an RR less than the 1:2 you mentioned is wise (and they know that almost NO retail trader is making a living with an RR as high as 1:3 and they understand why, and they know that on trading-floors and at a professional level and among others making a living from their trading, an RR of (a little bit) less than 1.0 is actually very common, and they know people who cut their own RR down from 1:2 to 1:1 and “suddenly, magically” became profitable after doing that

but these things are really difficult to understand without a lot of experience! (and if you don’t believe me, i don’t blame you at all, because i used to not believe that myself, and almost everything you read online tells you the opposite, and it took me years to learn and understand it - and most people give up before ever getting that far!)

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If you want to judge the value of using a fixed pip total as any kind of target, compare how many pips make up EUR/USD and GBP/USD - it’s 10,714 v’s 12,473 - a difference of 16%. JPY pairs make this variation worse - USD/JPY has 14,764 pips, a significant 37% more than EUR/USD.

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Hello @flamingoproxy, your thoughts on this is quite direct with no sugar coating (as it should be) and i much appreciate it.
I have read your thoughts on the RR ratio and i have taken note of it.

It is taking me a bit more time to digest the ATR aspects better, i’ll soon get the perspective on it.
Thanks @tommor too for bringing this (ATR) up!

I should do a follow up reply on the ATR soon

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Okay,
i wasn’t looking at or intend measuring the volatility of the overall currency pair.

So i’m back testing a Trendline trading system; i saw a setup (an entry + exit) that gave 1.5 RR and 42.7 pips reward if it went my way.

Screenshot (67)
Screenshot (67)1366×696 91 KB

My mind (as part of my setting up personal trading rules for this system):

  1. I accept the RR ratio, good.
  2. The Number of pips here is 42.7. Is this something i should risk to get? or wait on the setup that would offer > 70 and trade those ones only)
    I decided to come ask about it here.
    N/B: Not the general pair’s volatility, but the offer i’m getting from this specific entry/setup

But I’ve learnt better about the RR standard as @flamingoproxy have pointed.

My deductions from the opinions presented on the Pip gain/value issues;
My take home is that; 46 pip reward/setup is not bad but, should depend on my personal trading goal and what would work best for it.

PS: Thank you all, this is really my first question in this community and the impression is amazing. Thank for sharing, i appreciate.

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I guess I am going to go a little with and a little against the general flow here. :slight_smile:

I agree with the comments about a 1:2RR. In fact I was just recently watching a Utube about this and many comments were saying that they find 1:1RR much more profitable over time. I also base my trades on 1:1RR.
However…I think this also depends on what kind of trader you wish to be. I think 1:1RR is certainly good for intraday trading but maybe swing traders who retain trades for several days or more would certainly look for more. There are also traders who look for the occasional long term trends that will have a low success rate of even around 25% but then catch the long term trades that cover all the small losses along the way as well as returning a handsome profit on top. Personally, I wouldn’t recommend that style, though!

The point I am making is that the choice of TP and SL is all about “horses for courses” i.e. matched to your chosen trading style and instrument(s).

For example, I work from 1H charts with only one instrument and I keep a record of the max move after each set-up for both profit and drawdown. This way, I keep a picture of the approx typical moves that I can expect from each move. But this is not sufficient on its own.

With whatever method you use for entries, it is worth identifying and marking on your chart likely support and resistance areas based on higher TF charts. Then, whenever you have a setup you can first check where your pip targets and stops would be, based on your RR, and then fine tune these levels with whatever SR areas you have already identified. If the resultant likely profit is too small relative to the SL then ignore the setup and wait for the next.

In this way, your target and stoploss are in areas typical of the instrument and timeframe, and are at likely areas to be reached for your target, or your stop is beyond a level that invalidates the trade’s initial reasoning. Might sound complicated but a very simple example would be if the trade entry is based on price closing above a certain MA, then the stop would be if it closes back below that MA because the trade reasoning is now nullified.

Bit wordy, but anyway…I think the lesson here, as has been said already, is that there is no standard answer. It is all an integral and bespoke component of your overall strategy.

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Mhan you have killed it here. :+1: :+1:t4: Good thoughts and thanks
This is what i was really asking about quite frankly.
Thanks

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Here is an example of S/R areas (or zones) at work. This is my 1H chart for this week Mon-Fri (today). I have removed my strategy set-up for clarity and just left these areas to show their usage.

These yellow/orange S/R areas are based on the Daily and 4H TFs respectively and shown here on the 1H chart. When the price breaks through one of these and is in line with my strategy then the typical entry is where the green circles are placed and the stops are then placed on the other side of the area. The target is then either a set pip amount or the next zone if it is worth taking.

This kind of automatically gives a reasonable, but flexible, RR and with the stoploss at a level where the entry criteria is, by definition, nullified. Today’s trade is shown there with a 50+pip gain.

Just to give an idea of the concept that I use, that’s all.

1H weekly
1H weekly1388×766 26.8 KB

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Yeah this is beautiful thanks for the demonstration.

Yes, i do set my S&R level, stop loss and (TPs on next S&R level/zone) before hand. Then check up if the rewards are cool.
I’ve seen yours’s now; you said YES to 50+pip for this particular trade.

I love the demo you’ve given. cool and nice to see.

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That is correct, But the exit decision today was not only based on these S/R levels or pip level as such. Already in the morning I had gone through the calendar and there was no important events today so, being Friday, it was unlikely that there would be any great moves. I wasn’t really planning to do anything today, but the entry was good and promising and I just looked at it a bit later, saw a reasonably representative profit for such a day and just took it as a “bonus” :smiley: and, as you can see, it didn’t make that support area, being a quiet day!

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Here is a BP article that covers some valid issues to consider concerning exits.

Exit strategy is, in my opinion, one of the three most important cornerstones of trading: Entry, Exit, Risk/Money management.

All three cornerstones have loads of variants but they should always all be present in some form and inter-relationship and with workable clarity.

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Good article SovoS,
I have just gone through it, thank you for sharing

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As for the RRR, I definitely relate! My mentor always told me this 1:1 thing, when I heard it for the first time it was such an epiphany. As a day trader he says that the typical 1:2 RR is a bit overused, there’s no problem in it BUT if you have a good strategy with a good win ratio a 1:1 RR gives you many advantages: you stay in the market less (ie your risk for your trade to go against you is smaller), you take a little profit when another trader is still waiting for the profit to come (and doesn’t know whether it comes), you can prepare for another trade if you want it. I could add to this that with a 1:1 RR you can have smaller but more frequent profits, which is quite satisfying. And you can spend the least time on the charts, which helps you make your trading fit better into your daily schedule (I don’t want to spend all my time on the charts, so this was a very useful advice to me).

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as tommor already said, pips are different depending on which pair you trade. I also think that a 5 pip gain could be insane for a scalper while a swing trader wouldn’t even turn on his PC for 5 pips.

you are a beginner, why you don’t try the school on this wonderful website? you also wrote you don’t know much about ATR. ATR is more or less some kind of basics for a trader - > you see, babypip’s school of pipsology would be a big win for you :slight_smile:

in my personal expierence a 1:2 rr did not really work for me/my trading style so i “lowered” to 1:1 and was able to buy a ferrari :stuck_out_tongue: of course not (yet) but results started to get soooooo much better.

again: go through the school and finish it - it’s a game changer and listen to the guys above :slight_smile:

happy learning and happy trading later

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Yeah, true and certain!

Okay :+1:t4: :+1:t4:

Yeah i am done with the Babypis school of pipsology. By “not knowing much about ATR”, which i later checked up to recall, i meant to say; i didn’t cram everything just off my head, and was just showing genuineness of going to check-up and also some kind of note to keep the conversations going.

Yeah, there are not many free, accessible, and beginner friendly, yet thorough programmes on the internet like Babypips.
It’s wonderful, i loved every bit and do always go back to reference it.

And…back to my initial question;
I had good perspective from @SovoS that was much more in tune to clarifying my question with the right context.

Thanks for sharing your inputs too, i really appreciate.

Unrelated POV: I’m a Babypips graduate yunno :wink: :blush: :grinning:

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Don’t worry about it, it’s not fatal. Most people recover from it with only a few side effects! (Only kidding :smile: )

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I’m covered, i won’t have anything to recover from!!
:grinning:

To the moon only :blush: