Quote:
Originally Posted by iGoR
Hi jamespolis,
If I can help you a little bit then that is not the correct question you asked.
The amount of pips one makes is of no importance.
It is the amount of pip one makes devided by the risk he took that is important. Or better known as reward/risk ratio.
I gonna try to explain myself with 2 extreem examples. Extreems have the tendency to picture it better.
Lets say that someone makes an average of 1000pips per month (again it is an extreem example) but he has on a regular base in between drawdowns of 500 pips. That means that his reward is 2 x the risk he is exposed to.
That means he will need to place his value per pip in such a way that if he looses 500pips that he does not burn his account.
An other guy makes makes daily ONLY 5 pip and never has any losses ( again also here impossible but only as an extreem example).
That means that he only makes +/-100 pips in a month but he does not have any draw down. But that also means he does not have any risk what so ever.
That means he can boost up his value per pip to the absolute maximum. Every day he can trade with everything he owns in his life.
The guys who makes only 100pips in a month is going to make a lot more money then the guy who makes 1000pips per month because he needs to take in account that he can also have temporary drawdowns of 500pips.
To answer your question or try to help you is that you always need to look what the risk (drawdown) is of a praticular system in relation to the profits (reward) it makes. And most amateurs fail on this. They only look to the profits a system makes and place their leverage and value/pip in such a way that this would make them rich in no time. But the moment they face a bad period or serious draw down they burn half or compleet their accounts.
If you find yourself a system with a reward/rsik ratio between 2 and 5 over a longer period of trading (normally R/R ratio are calculated on a 3 year period) then you found yourself a good system.
That means if you trade of a 10.000$ account and if you have a system that has a R/R of 5 that you will need to place leverage and value per pip in such a way that if you loos or have a drawdown that you don't loos more then 25% of your account. That means that your end result at the end of the year will be 5 x as bigg as the risk that you took. That means 25 X 5 = 125% profit. That is extreemly good.
You will find some people who say or show these kind of results over a 1 month period. But ask them to show these results over a whole year and they will faill completely in doing so. Because they are way over-leveraged and the moment they encounter a bad period their account is burned.
Systems or people who claim that they would have a R/R ratio over 1 year period of 10 do not exist and I can only sujest to stay away from them. They are only theoretical and based on over-optimized back test.
friendly regards...iGoR
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Hey All,
I must agree with Igor. Pips is not the issue. Since you dont care about what the lots are worth than the only thing left is ROI based on R/R.
But it is important to note that leverage is a very important factor as is money management. When you add R/R, leverage & money management than it really does not matter how many pips you make. 1 or 1000, if you dont manage it right, it does not mean a thing.
Good Luck,
Bear-
06-16-2008, 04:03 PM
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