Do you measure your Forex success in Pips or Percentages?

02/14/16 • 6 min

Podcast: Do you measure your Forex success in Pips or Percentages? In this video: 00:30 – Money management and Risk 00:50 – How important are Pips? 01:30 – Percentages are the same regardless of your account size 02:15 – The problem with counting success in Pips 03:20 – All trades should have equal risk 03:52 – Download my Forex Calculator and use it – It’s Free! 04:30 – I’ve taught people from all over the World how to trade Forex 05:20 – A +2.3% account gain this week 05:50 – Help eliminate emotions and stop blowing your account How do you measure your success as a Forex trader? Do you look at the number of Pips you make, or do you look at the percentage return on your account you make? Let's talk about that and more right now. Hi traders, it's Andrew Mitchem here, The Forex Trading Coach. Today is Friday the 12th of February. I want to talk about a really topical subject. Money management and Risk I've had quite a lot of emails this week from people asking about money management and risk. I've also had quite a few emails from people saying, "Andrew, look, you know, I've made my account go from $1000 to $5000 and then I've blown it all in one day. I get that type of email quite often. What it shows me is that there are so many people out there who don't understand correct money management. How important are Pips? Unfortunately, when you look around online the vast majority of people tell you to measure your success of any strategy or years as a trader in terms of the number of Pips you make. I personally believe that that is not correct. I'll give you some examples of why. Just to quickly read out an email here that someone sent to me. "Hey, Andrew, can you tell me why I express my success in percentages and why I think that's better than Pips?" This person says, "Percentages depend on the account and, actually, say nothing about your success whereas Pips show you what's going on right now. That's from Jera Flow. Percentages are the same regardless of your account size I'm not sure that it's quite right, because for me a percentage is a percentage. It doesn't matter, regardless of your account size. As an example, this week right now I'm up 2.3% on my account right now. If I had a $10,000 account that means I've made $230 this week. If I had a $100,000 account it means I've made $2300 this week. It's still the same amount. It's the same amount risked. It's the same amount in terms of percentage gain made. The only thing that makes the difference between actual monetary value is the size of the account, but I'm still risking the same amount on each of the two accounts, and I'm still making the same amount on each of the two accounts. To me that's a far better way of being profitable than by looking at the number of Pips you make. The problem with counting success in Pips The problem is, let's say you took many trades on shorter time-frame charts, say like one-hour charts, 15-minute charts, and you made lots of small profitable trades, let's say. You made 10 Pips, and 15, and 20, and 30, etc., those sort of smaller amount of Pips. The thing is then you go and take a trade on say a daily chart and it loses 100 Pips, so that one trade that goes wrong completely outdoes and takes away from all those gains that you've made on all those shorter time-frame charts on lots of really good successful trades. You may have 80-90% win rate within your trading in terms of your profitable trades, but that way of trading in terms of looking at the number of Pips you've actually gone backwards and lost money. Whereas, if I had an equal risk on each one of those trades, regardless of it's profit target and regardless of its time-frame chart, for instance, then if I can make let's say half, or let's say I'm risking half of 1% on each of those trades but I'm making somewhere between 1, 1-1/2, even 2% gain if it's a full profitable trade. All trades should have equal risk

Previous Episode

This is why having a trading plan is so important

Podcast: This is why having a trading plan is so important In this video: 00:35 – Client makes +6.82% return in 2 weeks by sticking to his trading plan 01:20 - Trade specifically the way that suits you 02:02 – Create rules around your trading 02:45 – Trade results show consistency and profit 04:00 – 12 trades taken and 11 were winners 05:15 – Get on my free weekly webinars Have you ever wondered if a trading plan really does work? Well, I'm here to tell you it does, and I've got proof right here. Let's talk about that and more right now. Andrew Mitchem: Hi Forex traders, this is Andrew Mitchem here, The Forex Trading Coach, Today is Friday the 5th of February. I want to talk about trading plans and trading goals again, because a couple weeks ago I covered that at the beginning of the New Year, and I expressed how important I believe it is to have a trading goal and a trading plan. Client makes +6.82% return in 2 weeks by sticking to his trading plan Now, it just so happens that this morning I opened my emails and I've had an email from Paul who's been a client for just over two weeks. He said to me a number of things and it just backs up why having that plan is so important. By the way, before we get into it, Paul has made, on two accounts 6.82% in the first couple weeks since he's been with me, so we'll talk about those specific trades shortly. Just to read and quote some of the information that Paul said. He said, "Look, I'm taking it really slowly, only putting on trades that I have a high level of confidence in. I can tell you right now that I'm a one-hour chart trader. I use the lot size calculator, and I'm extremely strict with money management." That's the first outline. No specific plan here, but just the outline. Trade specifically the way that suits you He then goes on to say and explain about he's only taking trades initially on one-hour chart trades. He's leaving the trade on for an hour, seeing how they're going, and then after one hour he's then making a decision about moving stop-losses if the trade's moved up into profit. He's telling me exactly about what he's also looking potentially to add to a position if the trade's already in good profit, of what factors need to be in place to justify adding to a position, or just moving the stop-loss up, protecting the trade, and riding it to the full profit target. He also mentioned that over time he's looking at, and this is probably in about three months time, going to add weekly charts, daily charts, and four-hour charts to the existing time-frames, which is just the one-hour chart trades. Create rules around your trading He also mentioned here some rules that he's sticking to, and as an example, "I'm never gonna trade anything lower than a one-hour chart," so that's one-hour chart and above are the time frames that suit Paul. "I'm never gonna risk more than 1% of my total capital on a single trade or on a correlating trade," and "Under no circumstances will I enter a trade based on hype, gut feeling, or news." Now, there's some other rules that he's got listed here which are more specific to my course on trading strategy so I won't actually mention those right now in the video. Just to really let you know to outline really what Paul's done as he's got specific rules and he's sticking to them. Trade results show consistency and profit Now, what he's got down here he essentially mentioned in terms of Pips, not so much the return from the trade, but just to read out from one account here. He's taken a sell trade, Canadian - Yen, 82 Pips, another buy trade Euro - Aussie 26 Pips. Another trade here 32 Pips, 12, 8, and another sell trade Australian dollar - Japanese Yen, currently running 114 Pips. I've moved my stop-loss up and I've locked in 50 Pips of the trade. In total I've placed six trades. They're all winners on this account, and I've increased my account by 5.3%. That's one particular account.

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What to look for when choosing a good Forex broker

Podcast: What to look for when choosing a good Forex broker In this video: 00:23 – Are you looking for a good Forex broker? 01:00 – What makes a broker different? 01:30 – The brokers I personally use and why 02:00 – Who to use if you live in the US 03:01 – Ensuring your funds are safe 03:15 – Use a 5pm EST start of day chart 03:50 – Tight spreads are needed throughout the entire day 05:02 – It’s your decision, your money – choose wisely 05:40 – The JPY strengthened all week 06:04 - Live trading webinar with my clients – great trading results achieved. What qualities should you look for when choosing a good Forex broker? Let's talk about that and more right now. Hi, Forex Traders. Andrew Mitchem here, the Forex Trading Coach. Today is Friday, the 19th of February. Are you looking for a good Forex broker? I've had a lot of emails come through this week, people are looking for a broker to use and coming to me saying, "Andrew, can you make some suggestions of some good, reliable, Forex brokers? I keep reading reviews about these brokers, I'm a little bit concerned about where I should put my money, who do I trust my funds with, and my Forex future with in terms of a broker. Who do I choose? How do I choose one?" Well, I've just come back from the IFX Expo in Hong Kong and at that event, there were a lot of brokers. What makes a broker different? When you look around at brokers, to be honest, a lot of them offer much the same type of thing in terms of similar type of platform, let's call it, MT4, Meta Trader 4 Platform. They offer a couple extra little gadgets and little incentives. Maybe cash bonuses, whatever it is, to try and get you on board. Basically, a lot of them from the ad side seem very, very similar so how do you determine who to go for and who to trust your money with? The brokers I personally use and why Well, for me personally, I only ever recommend four brokers. Three of them I use personally, and they are AxiTrader, Pepperstone, and Go Markets. I've had a relationship with all three of them for many, many years. I've referred a lot of people to them and I've got no problems. The odd time you get one little question here or there but almost no issues whatsoever, and if there have been issues they get dealt with real quick. I personally have quite substantial funds with all three of those brokers and I have no hesitation in recommending those three brokers. Who to use if you live in the US The other broker that I also recommend, and this is mostly for my US based clients, and that's ATC Brokers. All four of those brokers, they have very similar things in common. They have good regulations. I have a good rapport with their staff, I've found them very useful, very friendly in terms of looking after clients, good to deal with if you ever get an issue. The three Australian brokers, they're all ASIC regulated, Australian Securities Investment Commission. Now, if you're in Europe or US, you may think, "Well, why does an Australian broker really appeal to me? Well, the good thing is with those three brokers in particular, that they all have European and UK servers, they have branches over there, offices over there as well. You can have your accounts in Aussie dollars, Kiwi, Canadian, Franc, Pounds, Euros, so multiple currencies that you can trade in. I believe also ATC Brokers have a branch in the UK, I believe. Ensuring your funds are safe As a broker, you need to make sure that your funds are safe with that broker. As far as I can tell, all four of those are about as good as you can get. The other thing, they also have what I call the correct chart time. Use a 5pm EST start of day chart They start the day at 5 PM, New York time, Eastern Standard Time. That means that on the daily charts your day starts at 5 PM and ends at 5PM, 4:59. On the daily charts, there are five full, complete days within one week.