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

This is a discussion on How many pips profit do you look for in a trade? within the Forex forums, part of the Markets category; Quote: Originally Posted by jtrader The answer is largely dependent upon and influenced by the timeframe that you are trading ...

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Old Nov 27, 2005, 10:45pm   #36
Joined Dec 2002
Cool Re: How many pips profit do you look for in a trade?

Quote:
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.

Last edited by jtrader; Nov 27, 2005 at 11:00pm.
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Old Nov 27, 2005, 11:11pm   #37
 
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Quote:
Originally Posted by jtrader
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
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Old Nov 28, 2005, 2:25am   #38
 
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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.
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Old Nov 28, 2005, 8:24am   #39
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Cool Re: How many pips profit do you look for in a trade?

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.......................................
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Old Nov 28, 2005, 11:49am   #40
 
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Quote:
Originally Posted by 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.
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.

Quote:
Originally Posted by jtrader
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.
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Old Nov 28, 2005, 6:46pm   #41
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Question Re: How many pips profit do you look for in a trade?

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TMM - 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.
Hi TMM

don't worry about being harsh, I like to think that I am reasonably thick skinned .

I don't want to labour this point endlessly, but presumably scalpers will use the lowest level of price detail (timescale) as their view is extremely short term - naturally they are looking for small/short term, regular intraday trades and profits, whereas an EOD timescale trader would have a longer term view and would be looking to capture a bigger number of pips/ticks/points at a time? as the timeframe that the strategy is applied to, the more time and scope the price has to move.

While this may not equate to higher profits (due to position sizing), if you apply the same strategy with the same entry and exit criteria and indicator values to a 1-minute chart and to a daily chart, the number of units of targeted profit should be different, but as accepted the trader has the ultimate say on targeted profits and when to enter/exit.

These are the points I was initially trying to make, but I accept that the trader is free to set their own profit target, SL, entries and exits regardless of timescale.

Regards

jtrader.

Last edited by jtrader; Nov 28, 2005 at 7:05pm.
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Old Nov 30, 2005, 2:38pm   #42
 
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I belive scalping can work, indeed I've been successfull with 5 pips profit and 12 pips stop. It's a matter of probability.
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