My Pip Calculations Are Wrong
March 4, 2007 by Trader Rich
I received the following comment this evening regarding my pip calculation method. He says:
"Most traders don't count multiple lots in with their pip total. You use it to calculate profits, but not to calculate pips. If that was the case, I would have had over 40,000 pips last month."
I have to claim ignorance here. I don't know how most traders calculate pip total. I've seen it done both ways especially if they use multiple targets with multiple lots. Nevertheless, I do agree with this poster and I don't want to be misleading in my calculations. Therefore I am changing the language of my posts and also my trade history and performance statistics.
This is an example of how I was calculating in the past:
If I went long the GBP/USD 3 lots at 1.9400 and closed the entire trade at 1.9430, I would have said that I gained 90 pips.
This is an example of how I will calculate going forward:
If I went long the GBP/USD 3 lots at 1.9400 and closed the entire trade at 1.9430, I will now say that I gained 30 pips.
So I will now how to talk more about the amount of money I gained or lost instead of stressing how many pips I gained or lost. I'm going to work in the next couple of weeks on adding more performance graphs to the site like equity curve, monthly profit/loss %, rolling monthly profit/loss %, and daily profit/loss %. This is what chaffcombe does on his site.
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This makes much more sense. Pips in an d of themselves are meningless.
I personally think your calculations are correct. The way I look at it is this way…If you trade 1 standard lot as a base unit then if you make a 5 pips profit on this 1 standard lot trade then that is 5 pips. If for whatever reason you trade 2 standard lots on the next trade and make 5 pips profit you should multiply by # of lots. So it would be 10 pips
Yea, I don’t know what to do at this point. I have to get more feedback from other traders.
I would like to add what I commented above. If you buy 2 lots at the same time and you sell one lot for a 10 pips profit and the second lot for 5 pips profit, in my book that would be 15 pips profit. From what I’m hearing in other people is that the profit on this trade would be 7.5 pips…that doesn’t sound right to me. What do you think?
I totally agree with you. I guess pip calculation is open to interpretation. It may be best just to calculate dollar amounts and % gain/loss. I don\’t know if there is a clear cut answer to this. I\’ve been looking around a bit.
I count and will count pips as you have done in the past. It gives me the best feeling of how I am performing as a trader, how well I extract pips from the market regardless of my capital. 150 pips this month for me is 50% more than last year, however, I m not trading better, I just have more capital. Focusing on pips, win% and win loss ratio made a huge difference for me. I have no problems to trade any size anymore. I also chart these measures in detail.