How many pips profit do you look for in a trade?

[zuke]

Time to add my 2p's worth!

Personally, I dont accept ANY loss greater than 30 pips. My target is usally 30-60 pips and Ill scale out of a trade once the first target has been hit.

 

[JTrader]

tommog - How many pips profit do you look for in a trade?

I think that in order for the answer to this question to have any meaning, we need context. Context is provided by the timeframe, position sizing and money management plan. The answer is largely dependent upon and influenced by the timeframe that you are trading on (larger timeframes=larger targeted/expected number of pips profit) stop-loss size (risk-reward ratio) and position sizing within a strict money management plan (i.e. 1% capital risk per trade).

Say you risk 1% per trade and you have £10k. You would be prepared to lose £100 per trade. If you trade on a 60-minute chart and your desired-optimum stop loss was 20 pips and your profit target was 40 pips, your correct position sizing (=£5 per pip) would result in you risking £100 to make £200. The same is true if you trade from a 30-minute chart where perhaps the stop-loss and profit target are around half of what they were on the 60-minute chart. If your desired - optimum stop loss was 10 pips and your profit target was 20 pips your correct position sizing (=£10 per pip) would result in you risking £100 to make £200.

Therefore pips profit per trade has no correlation with £profit. Number of pips profit to be expected is affected by timeframe of chart, and position sizing within a strict money management plan is what determines profit size.

Cheers

jtrader.

 

[jiacopel]

12.6 pips per trade , now i understand why you call yourself Badtrader!!!

Regards

TMM

12.6 pips per trade intraday sounds pretty damn good to me.

 

[tommog]

Hi Jtrader,

Thanks for the reply, although your post makes perfect sense from a mathematical point of view I personally believe it doesnt from a trading point of view. This is because the shorter the time frame the less reliable the trading signals (a five minute support line is not a valid as a long held support on the hourly/4hr/weekly chart). Also by trading for a smaller profit target you have a tighter stop which I believe increases your risk of being stopped out by market noise.

I think successful trading is about finding the perfect balance between a high enough time frame to provide worthwhile trade setups with a short enough time frame to trade larger positions. This is why i dont believe its a question of putting it into "context" because i believe in trading there is only one context, i see it as a scale:

e.g 10 pip target
(risk of getting stopped out)

or

e.g 100 pip target
(risk of target never being reached)

Assuming you only ever risked 1% of your capital on a trade with a 1:2 risk reward ratio in terms of maths everytrade has the same risk reward in terms of £. However this is trading and your success rate will be very different depending on where you sit on this scale, this is where i disagree with you Jtrader in the two examples you highlighted, because personally I would have far more profitable trades trade £5 a point with a 20 pip stop and a 40 pip target than I would trading £10 a point with a 10 pip stop and a 20pip target even though in financial terms they should make the same amount.

Being a good trader i believe is about learning where the most productive point on this scale is for your system, and this is basically the idea of this thread; to see where you sit.

Hope that makes sense,

Tom

 

[JTrader]

Hi tommog

I accept your valid points.

Perhaps just two questions are necessary -

How many pips do you look for in each trade? and on what timeframe are you trading?

It may also be useful to know the stop-loss, and name the specific currency pair, as profit targets for EUR/USD may differ to profit targets to other pairs like USD/JPY...........

Cheers

jtrader.

 

[tommog]

Hi Jtrader,

I try not to have fixed rules when trading, this is too restrictive so my targets vary. I.e if there is resistance 20 pips away it would be foolish take a trade looking at 25 pips profit.

However certain things remain constant, I always try to have 1:2 risk reward ratio, I will always have at least a 10 pip stop, so my trades are looking for between 20 - 50 pips profit.

In terms of time frame the higher the time frame the better, (although you have to give a little more breathing room to your positions the higher the TF obviously) i never trade below a 15 min chart to find entries and my favourite timeframes are hourly and 4hr.

I trade eurodollar

Tom

 

[badtrader]

A day trader /scalper tends to take as many small profits as possible, not allowing them to evaporate.the opposite of the "let your profits run" mindset", Day traders/scalpers achieves results by increasing the number of winners and sacrificing the size of the wins. It's not uncommon for a trader of a longer time frame to achieve positive results by winning only half or even less of his or her trades - it's just that the wins are much bigger than the losses. A successful day trader/scalper, however, will have a much higher ratio of winning trades versus losing ones while keeping profits roughly equal or slightly bigger than losses.

Lessened exposure limits risk - A brief exposure to the market diminishes the probability of running into an adverse event

smaller moves are easier to obtain - A bigger imbalance of supply and demand is needed to warrant bigger price changes. It is easier for a stock to make a 10 cent move than it is to make a $1 move.

smaller moves are more frequent than larger ones - Even during relatively quiet markets there are many small movements that a day trader/scalper can exploit.

Adhering to the strict exit strategy is the key to making small profits compound into large gains. The brief amount of market exposure and the frequency of small moves are key attributes that are the reasons why this strategy is popular among many types of traders.

 

[badtrader]

Day trading/scalping is based on an assumption that most stocks, currencies, futures, will complete the first stage of a movement (a instrument will move in the desired direction for a brief time but where it goes from there is uncertain); some of the stocks, currencies, futures, will cease to advance and others will continue.Remember it is far easier to predict the next 2 mins of you life than the next 2 days, its no different with trading.

 

[JTrader]

Good points guys.

Timeframe is important. But I suppose it becomes more important when a trader enters and exits trades only on the close of a bar, rather than on an intrabar basis. If you enter/exit only on the close of a bar, there is more room for the price to run in your favour, or against you. Although I think a maximum stoploss should be in place that may require an intrabar exit.................

jtrader.

 

[tommog]

There is no doubt people make good money scalping and it is as valid approach as any other.

However, i think we should employ a technique that suits the market we are trading. I personally dont believe forex is a product that is good for "scalpers". Futures is a price makers market where we can see volume, market depth and because of the way futures are constructed with different exchanges/ expiry months and products we can offset positions in other months and exchanges, i.e trading calendar spreads, even scalping the bid/offer (although this is unbelievably hard when not trading on the floor or paying retail prices), both these techniques have limited risk as im sure you are aware without me spending anymore time going into details of the futures market.

However forex is an OTC product, we dont have access to level2 and we take the prices we are given. And the spreads most people are trading are ridiculous to what a futures scalper would pay. If you have a 3 pip spread how can you look for less than 10 pips profit and still employ a good money management? Although scalping in the strictest sense is literally looking at 1-2 ticks profit with 1-2 ticks stop, more often than not not predicting a direction in the market but exploiting anomalies in the market. But in forex regardless of if you are trading for 100 pips profit or 3 pips profit you are predicting the direction of the market and i truly believe it is far easier to predict a longer term movement than short term.

I am genuinely interested to hear if anyone is making good money in forex looking for less than 10 pips profit off of a trade.

Tom

 

[abobtrader]

Hi tommog,

I don't have a profit target for individual trades. I let the market action dictate my entry and my exit. For the overall portfolio I want to achieve the best trading possible results given the standard (1-3% risk per trade). Anything above 20% would make me a happy.

This may sound very vague but I suppose thats because it is. I'm a discretionary trader trying a handful of strategies, some of which have a worse than 1:1 risk-reward ratio. That's because I previously went in to overkill on risk-management, setting stops too tight and not giving the trades enough room to breathe. I'm with you in believing its near on impossible to make a living by scalping, though I'm sure there are some exceptional traders out there who are doing it.

 

[badtrader]

I must say I find it easy to get 15 ot 20 pips trading Forex

 

[JonnyT]

How?

 

[TheMoneyMachine]

It's not about how many pips you make,it's about trading SIZE. That's what makes you money.

Incorrect, its pips & size that makes the money. :cheesy:

This is so On The Money , far easier to take 10 pips @ £10.00 than 100 pips @ £1.00

And its far easier to give it back again!!

The answer is largely dependent upon and influenced by the timeframe that you are trading on (larger timeframes=larger targeted/expected number of pips profit) stop-loss size (risk-reward ratio) and position sizing within a strict money management plan (i.e. 1% capital risk per trade).

Say you risk 1% per trade and you have £10k. You would be prepared to lose £100 per trade. If you trade on a 60-minute chart and your desired-optimum stop loss was 20 pips and your profit target was 40 pips, your correct position sizing (=£5 per pip) would result in you risking £100 to make £200. The same is true if you trade from a 30-minute chart where perhaps the stop-loss and profit target are around half of what they were on the 60-minute chart. If your desired - optimum stop loss was 10 pips and your profit target was 20 pips your correct position sizing (=£10 per pip) would result in you risking £100 to make £200.

Number of pips profit to be expected is affected by timeframe of chart, and position sizing within a strict money management plan is what determines profit size.

This is absolute nonsense!! Time frames are divisions of price action and should certainly not be the basis for stop/exit levels!! Also the profit expectancy of a position is NOT affected by the time frame being used!! Jtrader i think you should stop posting such nonsense for the sake of other aspirants and do some more homework!!!

Regards

TMM

 

[badtrader]

How?

Don't be greedy Jonny,If you set a target of lets say 25 pips. this don't mean you have to wait for the target to be hit, the same with a stop. If the market tells you to enter a trade you get in, but most ignore the market when its telling them when to get out.

 

[JTrader]

Quote:
Originally Posted by jtrader
The answer is largely dependent upon and influenced by the timeframe that you are trading on (larger timeframes=larger targeted/expected number of pips profit) stop-loss size (risk-reward ratio) and position sizing within a strict money management plan (i.e. 1% capital risk per trade).

Say you risk 1% per trade and you have £10k. You would be prepared to lose £100 per trade. If you trade on a 60-minute chart and your desired-optimum stop loss was 20 pips and your profit target was 40 pips, your correct position sizing (=£5 per pip) would result in you risking £100 to make £200. The same is true if you trade from a 30-minute chart where perhaps the stop-loss and profit target are around half of what they were on the 60-minute chart. If your desired - optimum stop loss was 10 pips and your profit target was 20 pips your correct position sizing (=£10 per pip) would result in you risking £100 to make £200.

Number of pips profit to be expected is affected by timeframe of chart, and position sizing within a strict money management plan is what determines profit size.


This is absolute nonsense!! Time frames are divisions of price action and should certainly not be the basis for stop/exit levels!! Also the profit expectancy of a position is NOT affected by the time frame being used!! Jtrader i think you should stop posting such nonsense for the sake of other aspirants and do some more homework!!!

Regards

TMM

Hi TMM

Perhaps I was giving a false impression of things when I illustrated my examples with profit targets and stop-losses that double when you double the timeframe. These were only example numbers to demonstrate a point - not entries into the trading bible.

I maintain that the timeframe of a chart will affect the number of pips profit. If I am trading EUR/USD on a daily chart, and my TA criteria is that I will enter a trade whern the RSI 14 (for example) passes above 25, and will exit when the RSI 14 passes back below 75, or vice versa for short trades, I will certainly be dealing with many more pips on a daily timeframe than I would be on a 1-minute chart at the other end of the scale.

Therefore when you are dealing with a bigger number of pips it tends to be so that the trade is given more breathing space (bigger stop-loss), alongside a bigger profit targets - all things being equal. If I use a 10 pip stop-loss on a 1-minute chart, I would not expect to achieve an equal % of winning-losing trades if I were to use the same strategy with the same 10 pip stop-loss if I was trading on a daily chart.........................

Timeframe naturally affects the indicators, their readings, and the position of the price within the indicators. The daily chart may be oversold, whereas the hourly chart may be overbought, therefore the timeframe WILL influence when trade signals are given by your indicators, and the direction of the trade (short or long).

Regards

jtrader.

 

[TheMoneyMachine]

Hi TMM

Perhaps I was giving a false impression of things when I illustrated my examples with profit targets and stop-losses that double when you double the timeframe. These were only example numbers to demonstrate a point - not entries into the trading bible.

I maintain that the timeframe of a chart will affect the number of pips profit. If I am trading EUR/USD on a daily chart, and my TA criteria is that I will enter a trade whern the RSI 14 (for example) passes above 25, and will exit when the RSI 14 passes back below 75, or vice versa for short trades, I will certainly be dealing with many more pips on a daily timeframe than I would be on a 1-minute chart at the other end of the scale.

Timeframe also affects the indicators, their readings, and the position of the price within the indicators. The daily chart may be oversold, whereas the hourly chart may be overbought, therefore the timeframe WILL influence when trade signals are given by your indicators, and the direction of the trade (short or long).

Regards

jtrader.

Time frames do not affect the number of pips expected, the view of the trader affects the number of pips expected, short, medium or long term. Time frames just provide price data in many divisions and one should select divisions relevant to ones view.

Regards

TMM

 

[Akuma99]

TheMoneyMachine, while perhaps put a little harshly, you are in essence correct, that timeframes are simply different representations of the same price action. You mention that expected pips are effected by the view of the trader, a traders view is effected by what "window" they are look through, and if it is a window that only shows a view of a target close by, then of course their target will be closer as well.

So yes you are right, the view of the trader is what effects profit targets, but it is the timeframe that effects what the trader views. If the trader only wants to look through the one window, then their target will always be around the same distance away.

 

[JTrader]

TMM

I see the point you are making. When it comes down to it, it is the traders strategy and decision making that affects profit. Using higher timeframes does NOT automatically equate to setting a higher pips profit target. Although this may be likely, the trader has the power to decide as and when to enter and exit.

Generally, the higher the timeframe used the higher the expectation in terms of pips/ticks/points profit. This is why scalpers predominantly use short timeframes whereas momentum, swing and position traders will tend to use longer timeframes up to daily, and perhaps beyond.

But you are correct that it is ultimately the trader that determines, the pips profit target, but at the same time you don't find many scalpers trading off of a daily chart.......................................

 

[TheMoneyMachine]

TheMoneyMachine, while perhaps put a little harshly, you are in essence correct, that timeframes are simply different representations of the same price action. You mention that expected pips are effected by the view of the trader, a traders view is effected by what "window" they are look through, and if it is a window that only shows a view of a target close by, then of course their target will be closer as well.

So yes you are right, the view of the trader is what effects profit targets, but it is the timeframe that effects what the trader views. If the trader only wants to look through the one window, then their target will always be around the same distance away.

Hello Akuma99,

Apologies for coming across rather harshly but it is in the interest of any aspiring traders using this forum to assist in understanding the basic concepts of the financial markets and how to profit from them.

Time frames provide different levels of price detail and should be selected to best suit the traders view not vise versa as jtrader was initially suggesting.

But you are correct that it is ultimately the trader that determines, the pips profit target, but at the same time you don't find many scalpers trading off of a daily chart.......................................

A scalper will use the lowest level of price detail available to them because there view is extremely short term, they do not have a short term view because they use the lowest level of price detail available.

Regards

TMM

P.S. Jtrader i apologise for replying rather harshly.