ForexSpirit

I consider the Cyrox forum to be one of the more interesting scalping forums out there. One of the recommendations I just don’t really understand espoused by Trollmann is that you should monitor the unrealised profit and loss (uP&L) of an open trade instead of the pip value of your position.

Thus, instead of seeing that your position is two pips in profit or three pips under water you should be looking at how much profit you are currently sitting on; you watch the dollar amount (if your account is dollar denominated) pulse up and down.

At the end of the day we are trading to make money so it seems perfectly reasonable to focus your attention on nothing but the money.

There is just one huge advantage to focusing on pips instead that I think trumps uP&L in all but one case. As your trading account grows in size (or shrinks) the pips remain constant. The monetary value of each pip changes, hopefully in line with ever increasing account equity. But what constitutes a big or small trade is going to remain the same if measured in pips. If you focus on the uP&L then you have to constant readjust your perception of where your stop loss and take profit levels lie. If instead you just focus on pips then you don’t need to readjust or relearn at all.

The only exception I can think of where you would not have this problem when focusing on uP&L is if you did not use profits to grow your account. Instead all profits are withdrawn or your equity is topped up by deposits in the case of losses. Thus your account equity is constant and is a fixed reference point which allows you to have unchanging stop loss and profit goals.

If trading multiple currency pairs enters the frame then it becomes slightly trickier, as the monetary value of a pip in each pair could be different. Happily I don’t have that to deal with that as I only trade one currency pair, as do most scalpers. So that’s a weak argument in favour of uP&L.

The final consideration is if your broker charges you a commission. If they do then you need to make enough profit on the trade to cover both the spread cost as well as the commission cost. The commission cost is normally shown as a dollar amount on the trading platform as positions are entered and exited. Wouldn’t watching uP&L be useful in this instance to see if your trade has gone far enough into profit to cover the commission cost?

I would counter that it is pretty trivial to calculate how many pips that commission cost is equivalent to. Even if you trade currency pairs beyond what your account is valued in, which results in the commission cost fluctuating based on exchange rates, the variations are going to be pretty minor.

Of course, the easy work around is to not have to deal with commission costs at all. I know that Oanda aren’t an ECN, but their low spread on EUR/USD and lack of commission is enough to keep with them for the moment.

I’m going to finish off with a quick trading update. Today saw my first positive session of the week. I consider a positive return (of any sort) to be an excellent outcome for the day. If I end up in the red but lose less than 1% then I consider that an average day and perfectly acceptable for this early stage of my scalping focus. Anything beyond that 1% loss is poor and needs to be corrected.

Here are this weeks returns so far:
Monday: (2.06%)
Tuesday: (2.03%)
Wednesday: (0.68%)
Thursday: 0.53%

Today’s trades: