Hi Foodaba, let me share my thoughts & how I'm trading with PAST.
Firstly, we all refer to pip moves because they are our unit of measurement. It's less confusing than talking about dollars or in my case GBP, because we all have different size accounts & are trading different amounts per pip move.
I might trade $1 per pip, you might trade $4 per pip & Nigel might trade $100 per pip, but you are right, it is real money on the line, which leads to the next issue....
How much per pip. I don't think about lot sizes or margin ratios, I think how much of my trading bank, as a percentage am I prepared to lose per trade. I then make sure my risk per trade is within that amount.
So before I get to real figures, I know from past experience trading FX that risking 3% per trade can get painful very quickly. Of course if you have a system you have proven to yourself delivers 80% winners, then 3% risk is more acceptable.
PAST as we are regularly told, will produce more losing than winning trades. The PAST method is new to me, so I know that initially I will do things wrong, be too keen to jump into trades & try to create trades before any reversal has developed.
As a result, I have been risking less than 1% on my PAST trades, knowing that even if I get stopped out for the full amount, it will not be painful & I can keep coming back enough times to catch the winning trades.
I also realise that my profits in GBP terms will be modest, though once a trade has started on a trend & my original risk has been reduced to zero, I can always add another position & another to build my profit potential with just my 1% risk. Over time my account will grow & my 1% risk figure will increase as well.
I'm in the UK & have had a trading account with IG Markets for a number of years. Earlier this year they raised the minimum FX trade size from £0.50 to £1. As I was trading FX with wide stops, I found that it was encouraging me to risk 3% plus just to get into a trade. Great when I caught a trend, painful when volatility took out my whole stop.
So I have opened an account with FXCM UK & though they trade in lot sizes, they also show the £ amount per pip, which is what I'm used to trading with. Their minimum size is 1micro lot, 1K or 1000 units of currency. For most currencies I have looked at, that is around £0.06 per pip, a big difference to IG's £1.00 per pip.
So, I put £2000 into this account, my 1% risk is £20 per trade. I have been using stops of around 20 to 30 pips & trading 10K lots which is around £0.60 per pip or $1 per pip. So a 20 pip stop is just 0.6% of my trading bank at risk.
If the trade closes out at 400 pips profit, then that's £240. That's not a life changing amount but is 12% of the original trading bank. If I manage my risk so I can afford to stay trading, those 12%'s will keep adding up over time.
You only have to look back over the charts with a weekly timescale to see what size moves do take place over a period of a few months. There are usually plenty of opportunities to have added to positions during the moves.
Sure, I want to be catching 1000 pip moves at £50 a pip & doing that on a monthly basis, that kind of money would make a difference but reality says that's unlikely to happen before Christmas!
