Hi!Forex Friend.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.
at now!
A:1.Is your first question – is 800 pips/month enough? Yes, it’s a good amount and quite a strange question to ask.
2.If your strategy uses the stop-loss, take-profit and trailing stop properly, there’s no need to be watching it all the day.
3.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.
4.Forex trading is very different from stock trading. It’s easier to name the similarities than differences. Buy and hold doesn’t work here
B:
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.
c: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.
