ForexGen Trading Area

Gaining Forex pips is what forex trading is all about. If a trade is closed for a plus number of pip, it will usually be a profitable trade.

However, a trader can end a trading month in positive forex pips and still have post a negative percentage for the month. Let’s look at how this can be.

Let’s say that your favorite trading pairs are GBP/JPY (Geppy) and USD/JPY. Most of know the GBP/USD typically moves a lot more pips than USD/JPY. This can often mean it is highly advisable to trade considerably smaller lots on GBP/JPY trades than on USD/JPY trades.

Lets say that for the month, all of the traders GBP/JPY trades were for 5 mini lots or half a full lot. This would be 50,000GBP on each trade. In this scenario each pip value will be worth 500 yens.

If all of the trades on GBP/JPY at the end of the month are +500 pips. That would net a profit of 250,000 yens.

Now let’s say the trader uses 1 full 100,000 lot on his USD/JPY trades. This would mean each pip value is worth 1,000 yens. And lets say his USD/JPY trades don’t go very well and they end up -300 for the month.

In this above scenario the trader ends up +200 pips. This is the +500 – 300.

However, the GBP/JPY trades end up netting 250,000 yens as menioned above.

But due to the higher pip values the USD/JPY trades end up losing 300,000 yen. So there is a net loss of 50,000 yens.

So as you can see in this example, positive pip values that include more than a single trade, do not necessarily mean positive returns!

The pip values in dollar terms in this example will fluctuate constantly depending on the USD/JPY exchange rate.