How Many Pips??

[trendie]

This is one issue that messes my head up, big time!

How do you calculate how many pips have been made in a trade?

If you buy one lot at price A, and sell it at price B, clearly the pips made = (B - A).
easy.

now, suppose you buy a lot at price A1.
then, later on, you get another signal, and buy again another lot at price A2.

you then close your trade at price B. how many pips have you made?

I would argue you have made B - ((A1 + A2)/2).
That is, you calculate your true exposure by averaging the total of your open positions.

example;
buy at 2.0100.
buy again at 2.0200.
close at 2.0250.

you have made (150 + 50)/2 = 100 pips.
NOT (150 + 50) = 200 pips.

reason for starting this thread:
PLEASE NOTE: THIS IS NOT IDT-BASHING. I LIKE THE THREAD AND THE POSTS AND THE CLEAR RULES (WHICH IS SO RARE ON THESE BOARDS).
I am also do not wish to disrupt that thread, but these issues seriously bother me.

Its just that I cant get my head around the way the "pips made" are displayed.
I feel it is giving a potentially misleading notion of what can be made, and not fully explaining the risk being taken.

the IDT intraday dreamtrading thread (IDT), shows multiple positiosn being opened, and then closed out at the same price.
surely these opening trades should be aggregated when calculating the total won??
(and not shown separately, ie, effectively counted twice)

[in my Columbo voice] oh, and just one more thing, sir:
each trade opened carries a degree of risk. if you open multiple trades, then you have to show the increased risk that goes with it.
eg; if you open a trade and risk 100 pips.
you open a second trade with risk 100 pips.
you close both trades for 150 pips profit each.
if you say you have made 300 pips, ie; not averaging open positions, you must also show that you doubled your potential exposure to risk.

otherwise, you could open 3 or 4 trades, and claim to make 389 pips in a single day when the instrument only had a daily range of 110.

am I being pedantic?

 

[fallingcold]

Interesting. I've turned this over in my head a few times too.

I finally ended up just treating them as separate trades. I do this because I'm big into statistics and tracking my performance, and this was the best way I could think to do it. This also lets me see if scaling in/out makes sense for me. If I take an average # of pips per trade I could be losing some valuable info about my trading performance.

otherwise, you could open 3 or 4 trades, and claim to make 389 pips in a single day when the instrument only had a daily range of 110.

I don't see that as too much of an issue. It's not like the market opens one place and moves straight +/- 110 pips. Wouldn't that be nice? Theoretically you could make more than that 110 pips in a day. I've done a couple of things here. I do track pips but I also consider my total pips earned each day as a percentage of the day's range (almost always a fraction of 100%). This pointed something out to me - I'd do better just betting the market would continue the same direction as the day before and set a stop loss appropriate for each pair. Boring strategy, huh? It's positive in the long run but you can have some serious streaks of down days.

FC

 

[Rhody Trader]

... I'd do better just betting the market would continue the same direction as the day before and set a stop loss appropriate for each pair. Boring strategy, huh? It's positive in the long run but you can have some serious streaks of down days.

I just want to make sure I understand what you're saying here. If Day1 is up then you believe Day2 would also be up (and vice versa) more often than not?

My research indicates otherwise.

 

[wasp]

I've never quite understood, and apologies if I'm taking this off track here but, when people say I went 2 lots and the market moves from 2.0100 to 2.0150 and they say they made 100 pips???!

To me, you made 50 pips with 2 lots... I trade at 50 lots, my pip count must be freakin' huge!!!

In regard to your point though Trendie...

Lets say your theory I buy them both with 50 lots then close all out at the same level... IMO thats 150 pips as they were essentially 2 seperate trades.

 

[timm]

pips won is not very useful how ever you count it unless you also know pips risked.

From the IDT thread is see there were three trades opened at 20106, 20105 and 20084; all closed at 20116. All had stop at 20006.
So pips won was 10+11+32=53 & pips risked was 100+99+78=277.

As long as you quote both numbers. it doesn't matter whether you divide them by 3.

 

[themaestro]

i dont see the problem here, your average entry price is (A1+A2)/2 so your average profit is B-(A1+A2)/2=100 in this case , you traded two contracts so your total profit is 2x100= 200

 

[shadowninja]

Ha. Funny this thread gets resurrected. I am trying to figure out best way of calculating pip profit when I partially close a position!

I think I will just have to assume that if a standard trade is 1 lot, then I always trade a multiple of 1 lots so that I can close the position. Therefore if I gain 20 pips with a position of 5 lots and close 4 lots, I've gained 80 pips with the other lot left to profit, too.

 

[Rhody Trader]

And thus we see the limitations of thinking in pips rather than in % return. Except in the most specific of instances, pips are not a readily comparable measure of trading performance.

 

[searchlight]

This is one issue that messes my head up, big time!

How do you calculate how many pips have been made in a trade?

If you buy one lot at price A, and sell it at price B, clearly the pips made = (B - A).
easy.

now, suppose you buy a lot at price A1.
then, later on, you get another signal, and buy again another lot at price A2.

you then close your trade at price B. how many pips have you made?

I would argue you have made B - ((A1 + A2)/2).
That is, you calculate your true exposure by averaging the total of your open positions.

example;
buy at 2.0100.
buy again at 2.0200.
close at 2.0250.

you have made (150 + 50)/2 = 100 pips.
NOT (150 + 50) = 200 pips.

reason for starting this thread:
PLEASE NOTE: THIS IS NOT IDT-BASHING. I LIKE THE THREAD AND THE POSTS AND THE CLEAR RULES (WHICH IS SO RARE ON THESE BOARDS).
I am also do not wish to disrupt that thread, but these issues seriously bother me.

Its just that I cant get my head around the way the "pips made" are displayed.
I feel it is giving a potentially misleading notion of what can be made, and not fully explaining the risk being taken.

the IDT intraday dreamtrading thread (IDT), shows multiple positiosn being opened, and then closed out at the same price.
surely these opening trades should be aggregated when calculating the total won??
(and not shown separately, ie, effectively counted twice)

[in my Columbo voice] oh, and just one more thing, sir:
each trade opened carries a degree of risk. if you open multiple trades, then you have to show the increased risk that goes with it.
eg; if you open a trade and risk 100 pips.
you open a second trade with risk 100 pips.
you close both trades for 150 pips profit each.
if you say you have made 300 pips, ie; not averaging open positions, you must also show that you doubled your potential exposure to risk.

otherwise, you could open 3 or 4 trades, and claim to make 389 pips in a single day when the instrument only had a daily range of 110.

am I being pedantic?

if we take the example of trendie gave here ; this is how i would approach it.
example:
buy at 20100
buy again at 20200
close at 20250
for the simplicity say; each time 1 lot is purchased.
if he/she didn't buy the the second lot gain would be 150 pips.So buying second lot would not reduce or increase gains pips wise. I say you made a 150 pips; first 100 with 1 lot ; than another 50 with 2 lots.

searchlight