Since the start of trading, there has been a debate of whats more important dollars or pips.
and the answer is always different. Why is that? well it typically depends on who is answering the question.
If you are a trader who is trying to get a client, it is typical that you will boast on your return on investment (ROI) which is based on dollars earned vs the initial balance. This is after all how you measure your attachments and how you get compensated. Nothing is wrong with that, and you can compare yourself to any other trader based on the fact that the % is what you have in common, not the dollar amount.
However when your an investor, while it is really cool to see traders flashy returns, you need to ask yourself a major question, what kind of risk is being put on my money?
is the trader going all in? is he capturing huge moves?
None of these questions can be answered with a ROI figure. This is where PIPS come in.
Unlike ROI, amount of pips tell you how well did your trader master the market.
As pips earned means that the trades that were put on were correct. and this is by far the most important part of being a trader.
After all being right on trades is 50% of the task.
Yes ROI matters too, but please tell me, where would you invest, a trader who makes 100% a month and earns 100 pips, or a trader who earns 10% a month and earns 1000 pips?
To me, the answer is obvious... the trader who makes 1,000 pips is the better trader and I will sleep well at night knowing my money is safe.
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