20 pips a day is all you need! See what I mean..

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Old Jun 21, 2010, 8:40pm   #1
 
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Arrow 20 pips a day is all you need! See what I mean..

One of the most valuable things that an online forex trading course can show you is how valuable 20 pips a day is..

1 standard lot at 20 pips/day = $200/day = $50k/year
2 standard lots 20 pips/day = $400/day =$100k/year
3 standard lots 20 pips/day = $600/day = $150k/year
5 standard lots 20 pips/day = $1000/day =$250k/year
10 standard lots 20 pips/day = $2000/day = $500k/year

If you were obeying 2% risk management, then you can multiply your account about 5 times a year.. at 4% risk management, you can multiply your account roughly 10 times /year. To demonstrate..

If you have a $10k trading account and you are trading at a 2% risk, then you can risk $200 per trade (2% of 10k = 200). that means you can trade 1 lot with a 20 pip stop and 20 pip target (1:1 risk reward, least acceptable).
If you can make 20 pips/day on avg with that 1 lot you will make 200/day=1000/wk=50k/year..

So, you just made a $50k/year income with just a $10k account!! only risking 2%. Most traders dont appreciate the leverage we get, and risk way too much, only blowing their accounts before they know what went wrong!

At a less conservative 4% risk management level, you could risk $400 per $10k. Using the same 20 pip model, we would trade 2 lots with 20 pip stop and target. 20 pips/day would now equal $400/day=$2000/week=$100k/year. So, a $100k income was achieved with a $10k account, using the same 20 pips/day strategy.

What's important is that we never need to try for more pips/day, thats too difficult and novice forex traders have a hard time realizing this. It is more beneficial to be consistent at a small number of daily pips and then gradually increase your lot size as your account grows.

btw, this is NOT compounding, this is taking your profits out every week. If you were to leave the money in your account and increase your lot size according to your account balance you would see astronomical gains.
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Old Jun 21, 2010, 9:28pm   #2
 
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Re: 20 pips a day is all you need! See what I mean..

shakespeare515 started this thread Should also say this is for day traders and scalpers
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Last edited by shakespeare515; Jun 21, 2010 at 11:15pm.
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Old Jun 23, 2010, 4:48pm   #3
 
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Re: 20 pips a day is all you need! See what I mean..

Another way to look at it is that it's 44% compounded interest per month at 10% margin management, which is 795% per year.


Quote:
Originally Posted by shakespeare515 View Post
One of the most valuable things that an online forex trading course can show you is how valuable 20 pips a day is..

1 standard lot at 20 pips/day = $200/day = $50k/year
2 standard lots 20 pips/day = $400/day =$100k/year
3 standard lots 20 pips/day = $600/day = $150k/year
5 standard lots 20 pips/day = $1000/day =$250k/year
10 standard lots 20 pips/day = $2000/day = $500k/year

If you were obeying 2% risk management, then you can multiply your account about 5 times a year.. at 4% risk management, you can multiply your account roughly 10 times /year. To demonstrate..

If you have a $10k trading account and you are trading at a 2% risk, then you can risk $200 per trade (2% of 10k = 200). that means you can trade 1 lot with a 20 pip stop and 20 pip target (1:1 risk reward, least acceptable).
If you can make 20 pips/day on avg with that 1 lot you will make 200/day=1000/wk=50k/year..

So, you just made a $50k/year income with just a $10k account!! only risking 2%. Most traders dont appreciate the leverage we get, and risk way too much, only blowing their accounts before they know what went wrong!

At a less conservative 4% risk management level, you could risk $400 per $10k. Using the same 20 pip model, we would trade 2 lots with 20 pip stop and target. 20 pips/day would now equal $400/day=$2000/week=$100k/year. So, a $100k income was achieved with a $10k account, using the same 20 pips/day strategy.

What's important is that we never need to try for more pips/day, thats too difficult and novice forex traders have a hard time realizing this. It is more beneficial to be consistent at a small number of daily pips and then gradually increase your lot size as your account grows.

btw, this is NOT compounding, this is taking your profits out every week. If you were to leave the money in your account and increase your lot size according to your account balance you would see astronomical gains.
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Old Jun 25, 2010, 3:32pm   #4
 
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Re: 20 pips a day is all you need! See what I mean..

Yeah, I think it's possible to average 20 pips a day or more, but it's not healthy to set a gold standard for the day.

Either way, you've shown the power of MM! Which should be the first thing people learn. Charts are charts. When you're proficient you'll likely acheive 50-60% accuracy and without Money Management, why bother...
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Old Jun 25, 2010, 3:50pm   #5
 
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Re: 20 pips a day is all you need! See what I mean..

Let me give an ironic twist that hardly no one considers. First we agree that strict MM principles are important. With total adhereance to that, let me give an example of something that is overlooked.
As traders, we all go through dry times. Let's say someone loses 20% of the account. They need to gain 25% to get back to where they were originally. Simple math--You start at $10, then drop to $8-- that is 20% loss. Afterwards, your gains take you back to 10, which would be 25% of 8. Just for that example you have to win 25-20, just to break even, which is 56% of the time. My repudiation is not meant as obstinance, but if you are winning 50% of the time, then you are really losing. If you are winning 60% of the time, you are winning, but barely. That is still good, because it still puts that trader in the upper echelons of all traders, because 90% of all accounts bankrupt.


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Originally Posted by lbranjord View Post
Yeah, I think it's possible to average 20 pips a day or more, but it's not healthy to set a gold standard for the day.

Either way, you've shown the power of MM! Which should be the first thing people learn. Charts are charts. When you're proficient you'll likely acheive 50-60% accuracy and without Money Management, why bother...
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Old Jun 25, 2010, 3:56pm   #6
 
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Re: 20 pips a day is all you need! See what I mean..

One thing I forgot to mention, but I agree whole-heartedly with you about not setting a gold standard. My goals are to gain better mental and emotional strength, so I can be of a proper trading mind. I also feel I can always improve and refine my methodology, even though it is totally independent of any peripheral intervention.
If I do those things, then the pips have always been there. I can tell you the overall average for me is greater than 20 pips per day, but that does not matter. If I made 20 pips per week, I would still consider myself a success.


Quote:
Originally Posted by 4xpipcounter View Post
Let me give an ironic twist that hardly no one considers. First we agree that strict MM principles are important. With total adhereance to that, let me give an example of something that is overlooked.
As traders, we all go through dry times. Let's say someone loses 20% of the account. They need to gain 25% to get back to where they were originally. Simple math--You start at $10, then drop to $8-- that is 20% loss. Afterwards, your gains take you back to 10, which would be 25% of 8. Just for that example you have to win 25-20, just to break even, which is 56% of the time. My repudiation is not meant as obstinance, but if you are winning 50% of the time, then you are really losing. If you are winning 60% of the time, you are winning, but barely. That is still good, because it still puts that trader in the upper echelons of all traders, because 90% of all accounts bankrupt.
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Old Jun 25, 2010, 3:58pm   #7
 
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Re: 20 pips a day is all you need! See what I mean..

Quote:
Originally Posted by 4xpipcounter View Post
Let me give an ironic twist that hardly no one considers. First we agree that strict MM principles are important. With total adhereance to that, let me give an example of something that is overlooked.
As traders, we all go through dry times. Let's say someone loses 20% of the account. They need to gain 25% to get back to where they were originally. Simple math--You start at $10, then drop to $8-- that is 20% loss. Afterwards, your gains take you back to 10, which would be 25% of 8. Just for that example you have to win 25-20, just to break even, which is 56% of the time. My repudiation is not meant as obstinance, but if you are winning 50% of the time, then you are really losing. If you are winning 60% of the time, you are winning, but barely. That is still good, because it still puts that trader in the upper echelons of all traders, because 90% of all accounts bankrupt.
Right. I guess I was ASSUMING (which is never a good thing to do) that the wins would be larger than the losses.

If they are even, say 20 pip stop, 20 pip target, then I agree with you 100%.
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Old Jun 25, 2010, 4:04pm   #8
 
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Re: 20 pips a day is all you need! See what I mean..

Quote:
Originally Posted by 4xpipcounter View Post
One thing I forgot to mention, but I agree whole-heartedly with you about not setting a gold standard. My goals are to gain better mental and emotional strength, so I can be of a proper trading mind. I also feel I can always improve and refine my methodology, even though it is totally independent of any peripheral intervention.
If I do those things, then the pips have always been there. I can tell you the overall average for me is greater than 20 pips per day, but that does not matter. If I made 20 pips per week, I would still consider myself a success.
I haven't averaged out my pips because Oanda bases your account history on price, what a bummer because I'd like to know. I do know that I usually trade at about 45-60% strike rate, with bigger winners.

It feels good to lose, when you reach that point that it doesn't make you second guess yourself. It's like taking a weak punch, knowing you're about to knock that fool out!
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Old Jun 25, 2010, 4:13pm   #9
 
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Re: 20 pips a day is all you need! See what I mean..

Yopu got that right! My emotions never change with a losing trade or a huge winning trade. I say, "Big deal!" It's just part of the job.

With regards to your other post, if you have a 20-pip stop and a 20-pip limit, and you are consistently winning 50% of the time, then it probably means the margin is not changing, which means that is the break even point.

My reference was more the dollar amount. I don't use stops, which means it could never be a reference point with me.


Quote:
Originally Posted by lbranjord View Post
I haven't averaged out my pips because Oanda bases your account history on price, what a bummer because I'd like to know. I do know that I usually trade at about 45-60% strike rate, with bigger winners.

It feels good to lose, when you reach that point that it doesn't make you second guess yourself. It's like taking a weak punch, knowing you're about to knock that fool out!
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Old Jun 25, 2010, 4:22pm   #10
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Re: 20 pips a day is all you need! See what I mean..

The problem with aiming for 20 pips a day is, it does not give you a very good win ratio.
if you want a basic 1:2 win ratio you need to have a stop loss at 10 points and unless you have near perfect entries every time, you will be blown out of your trade by very quickly, by whipsaws.And then the issue that 4xpipcounter mentioned comes into play.
you need to aim for at least a 1:2 win with a decent stop loss.
I aim for a 1:3 win ratio and my stop loss amount varies, to a maximum of 40 points, and only place 1 trade a day,This makes the actual trade worthwhile and you can cope with the losing ones, which we will always have. I did well all week until today when I took a loss hence turned off the charts and have spent the rest of the day on T2W as its raining outside.
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