In Price Action Trading Strategy

Ok its time for some math….a little reward check and why patience pays off.

First off, I looked at the current track performance, using a +150 pip take profit and 5 contracts as a benchmark. I dont want to take too much time explaining what I'm doing here so its a little better if I just show you.

Lets forget for a second about changing market conditions, forget about sentiment hooplah, forget about market obstacles, etc. – lets just quantify how to make the most out of what we do here without any ramblings.

Out of 28 trades so far, 14 (exactly half) have hit +150 pips of profit.

150*14 = 2,100 pips * 5 contracts = USD $105,000.

…but we have the other 14, so lets assume a -40 pip stop loss on those:

-40*14 = -560 pips * 5 contracts = USD $-28,000.

Add them together and you get 1,540 pips, or $77,000 for taking 28 trades. Not bad.

Now the other side of the coin. Lets say you scalp each and only take 20 pips of profit on each one. There were 26 of these.

20*26 = 520 pips * 5 contracts = $26,000

and dont forget about the other two with -40 pip stop losses.

-40*2 = -80 pips * 5 contracts = $-4,000

Add them together and you get 440 pips, or $22,000

So lets see, for about 2 months of part-time work you can have either $22,000 or $77,000. Annualize that and it comes out to $132,000 versus $462,000 per year, respectively.

But wait, it could get even better.

Of the 14 trades that never made it to +150 pips, 7 hit +50 pips of profit. We'll use the +50 pip profit mark as a benchmark for setting a stop loss to breakeven. So we do the math again, taking away 7 of the 14 trades that never made it to +150 pips of profit:

-40 * 7 = -280 pips * 5 contracts = $-14,000

Subtract that from your $105,000 of profitable trades = $91,000. Annualized that comes out to $546,000.

Just some food for thought……..

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Showing 10 comments
  • The Lonely Trader
    Reply

    Yep.

  • Hugh
    Reply

    Good ideas to think about.

  • Anonymous
    Reply

    AlbertJee

    Profit margin must alwasy be higher then loss,

    Its almost like when u profit you walk 20 step ahead and when u lost u walk 10 step behind, eventually you will still win even if its a 50/50

    Great sharing Steve

  • Anonymous
    Reply

    But how meny of those trades that ended up in +150pips did get screwed after hitting +50 pips and then retracing to say enything from -51 pips to 89 (as 40 S/L were used)? they would have holded to 150 IF we wouldnt have moved our S/L to breakeven at +50.

  • Steve W.
    Reply

    Hi – there were 7 (-40 * 7 = -280 pips * 5 contracts = $-14,000) in the math above

  • tradingfan
    Reply

    Great post man. And thanks for sharing this with us, i am actually a newbie to forex trade, and used to surf net just to look for interesting Forex blogs. And this one is pretty interesting. Thanks once again.

  • Anonymous
    Reply

    Great post, can you help me to achieve the results your example shows?

  • Dave
    Reply

    There are two problems to this logic.

    A) there a many multiple times more opportunities to make 20 pips than 150 pips from a trade meaning u can trade many more times at 20 pips a pop.

    B) Scalp trades generally require a much smaller stop loss ie. 20 pips to you can use twice the lot size meaning your pips are worth twice as much.

  • Anonymous
    Reply

    What account size, risk % for trading 5 contracts (lots) Steve? Wondering about the money management of this math.

  • Steve W.
    Reply

    @Anon – it varies depending on your own individual tolerance level. 5 contracts specifically would come out to $50 every flat pip…again just your tolerance level, what you are willing to risk and manage so that it doesn't affect the outcome of your trades. Here is another article where we did into this a little deeper: https://paracurve.com/2010/01/optimal-stop-loss-take-profit-placement.html

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