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DON’T BE FOOLED!! (PIPS VS. PERCENTAGE)

Hi traders!

We wanted to address something really important is this post and that is should you rate your trading success in the amount of pips you make or in the percentage growth on your account? Let’s discuss.

There are lots of traders and trading establishments out there that will state proudly that they made ‘X’ amount of pips that day but does that actually mean that they made a profit? The answer is not necessarily and we are going to explain why you should absolutely NOT work out your trading success using pips as a gauge.

Let’s take 2 trades as an example. The first trade wins and makes the trader 100 pips. The second trade is a loser and the trader loses 80 pips. So the trader is 20 pips up and you would naturally assume that the trader has made a profit. Wrong!! Unless the trader specifically uses the same risk per pip on each trade (unlikely) then they could have actually LOST money. Let’s say the trader calculated his risk per each trade using a position size calculator and it worked out that the risk on the first trade was £1 a pip and the second trade was £1.50 a pip risk. The first trade made £100 (100 pips gain) and the second trade lost £120 (80 pips lost). So the trader made 20 pips but lost £20 overall.

Do not be fooled by anyone who uses pips as a way of showing their trading success. It is always about the percentage growth on the account and don’t forget it 🙂

We hope this has helped you understand trading a bit more.

Have a great weekend all.

T & T

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Malcolm
Royston
Jody
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Yotko
Malcolm
Royston
Jody
Jack
Yotko
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