New to forex with a few questions.

Mitela

Trader
Oct 30, 2011
3
0
12
I am new to Forex but have been interested in stocks, watching the markets, and trading for last couple of years. I have developed a strategy which over the last year has an average gain of about 800 pips per month. It runs on daily and some trades last in upwards of ten days. There are some months without a single trade. My first question is, to at least me, this seems like quite a bit of pips but my strategy is running on daily and rides major trends, is this actually quite a bit of pips for trading seriously? Secondly, it seems as though trading daily, allowing it to run all night is quite risky. Is it recommended that I stay away from daily and instead invest my time looking for strategy that would only give active trades while I am overwatching the market? Third, as I am new, I was wondering if anyone could recommend some excellent texts to help me understand more on forex. My four question, is are there any problems that forex traders deal with that stock traders do not? I am not one easily swayed by emotions but as I have already asked I am cautious about the system and any kind of factors that I would have to pay certain heed to.

Thank you for your time and I appreciate any comments.
 

Enivid

Administrator
Staff member
Nov 30, 2008
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Odessa
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I am new to Forex but have been interested in stocks, watching the markets, and trading for last couple of years. I have developed a strategy which over the last year has an average gain of about 800 pips per month. It runs on daily and some trades last in upwards of ten days. There are some months without a single trade. My first question is, to at least me, this seems like quite a bit of pips but my strategy is running on daily and rides major trends, is this actually quite a bit of pips for trading seriously?

Is your first question - is 800 pips/month enough? Yes, it's a good amount and quite a strange question to ask.

Secondly, it seems as though trading daily, allowing it to run all night is quite risky. Is it recommended that I stay away from daily and instead invest my time looking for strategy that would only give active trades while I am overwatching the market?

If your strategy uses the stop-loss, take-profit and trailing stop properly, there's no need to be watching it all the day.

Third, as I am new, I was wondering if anyone could recommend some excellent texts to help me understand more on forex.

I assume you need books specifically about Forex, because you know your way about the trading in general, right? I'd suggest Diary of a Professional Commodity Trader by Peter Brandt.

My four question, is are there any problems that forex traders deal with that stock traders do not?

Forex trading is very different from stock trading. It's easier to name the similarities than differences. Buy and hold doesn't work here :).
 

Mitela

Trader
Oct 30, 2011
3
0
12
Thanks for reply.
The reason I asked was I remember looking on some forums a year or so again and someone posted that they had developed a strategy that was earning 200-250 pips a week and there was quite some praise from some of the members but I was on another that seemed to suggest that it wasn't much. I just wanted to make sure on what would be considered a decent amount.

Is there any stop loss percentage or amount of pips you would suggest as not to get over ambitious but allow enough slack to not get out too early?

I appreciate the suggestion and will check the book out.
 

Easy Trader

Master Trader
Sep 17, 2011
240
4
59
Pips are relative to the traders risk/timeframe/stop size/ and system.

Trader A could leverage himself to 100$ per pip.
Trader B could leverage herself to .01$ per pip.

If your system averages 800 pips monthly then you can back test and tweak it to get the most return and least draw down 'out of the 800 pips'.
Another trader may have a totally different approach and 20 pips may be just as sufficent as your 800, as far as risk/return/drawdown.

Pips are a good measure to know what you can saftely expect from your method (all methods being different) and to see and exploit your edge.
 
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Enivid

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Is there any stop loss percentage or amount of pips you would suggest as not to get over ambitious but allow enough slack to not get out too early?

Stop-loss should be based on your strategy, not on your risk expectations. You control your risk with a proper position sizing, leaving stop-loss the same as your trading system tells you (support/resistance, nearest high/low, Fibo levels, etc.)
 

Mitela

Trader
Oct 30, 2011
3
0
12
Thank you Easy Trader for your reply, that could have very well been the case as when I was looking at the forums I was more interested in the strategy and how they incorporated different indicators rather than what they were trading and did not know much at all about forex.

Also thank you Enivid, but I should rephrase my question. I do obviously have exit strategies in place but I meant in case all goes wrong and none of my technical indicators tell me to exit, is there any certain percentage or pip number that would be recommended to just exit? When I trade stock options I would leave position if the option lost 20% of its value regardless if the exit strategies told me to exit.
 

Enivid

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In Forex, I prefer the approach when a trader exits a position immediately upon receiving exit signal form his strategy or when he notices that the market conditions have changed and the trade may go in wrong direction any time soon.
 

forexgirl00

Trader
Nov 23, 2011
7
0
12
PIP'S

What is an amout of PIP'S that would make one successful ?
How many PIP'S to know your stratagy is working .
Thanks for the input .
 

Easy Trader

Master Trader
Sep 17, 2011
240
4
59
There is no set amount of pips to determine success in this business....In short it is a balance of winning trades to loosing trades, and win% to loss%...A trader may have 10 profitable trades@10pips and 1 loss@101pips, the trader is now negative 1pip after many profitable trades, this can also work in reverse with many losses and only 1 winner. There are systems that run 50/50 W/L, the trader may profit 15pips per trade and only loose 10pips per trade, which in turn give the trader an over-all long term edge. Or profit 10pips per trade and loose 15pips per trade this would be a loosing system @ 50/50 Win/Loss. This is one aspect of using pips 'perse' in determining success. Another factor is leverage which is the great double edged sword of Forex. (Lets say 'Success' is $500.00 per trade!)
Trader A may leverage himself to 1$ per pip- this trader would need a system to average 500 pips per trade.
Trader B may leverage herself to 100$ per pip- this trader would need a system to average 5 pips per trade.
Keeping in mind that what a trader can 'easily' profit they can 'easily' loose with leverage.
AND it all truely depends what a personal trader deems as 'SUCCESS'.
The trick to this game is to find a system, method, or a approach that is "TRUELY" profitable.
After that, take that system and employ "proper" money managment and risk.
The "filthy rich" part will come in time as a byproduct of correctly executing them together.
Hope this helped.
 
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