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#1
Using a Pips Unit

"EUR / USD Sell Signal, Get 100 Pips Profit Opportunity!"

"Follow this Producing 1000 Pips Trading Strategy!"

"A Loss Trader 200 Pips Overnight"


Have you ever heard the sentences above? If yes, then don't be easily consumed by the number of pips mentioned, because profit and loss are still very relative if measured in pips.

Just because you are used to hearing analysts or other traders expressing profit and loss in units of pips, does not mean you are also advised to use it when setting up money management. In fact, pips only reflect the price movement, not the actual amount of profit.

Money management with pips
One pip for a standard lot user is certainly different from a micro pip trader. Traders who claim to be able to profit 500 pips without mentioning a large profit in the dollar can not really be calculated credibility, because it could be that he only uses small lots. If true, then the context cannot be compared with a trader who can profit 500 pips with large lots.

However, volume trading is very influential on the psychological aspects. Small lot traders can easily risk 500 pips, but large lot users need extraordinary courage to bear it.
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Learning from these differences, it's a good idea to start leaving pips when setting up money management. Instead, make it a habit to calculate direct profits and losses in units of Dollars. When you plan a Risk / Reward Ratio, for example, don't just pay attention to how many pips are determined, but also calculate how many if converted into Dollars.

Knowing firsthand how much profit and loss also makes it easier for you to apply the 1% rule. For example, your capital is $ 5000, meaning that each position should not be burdened with a risk of loss of more than $ 50. To meet these rules, it is clear that you cannot calculate Stop Loss in the form of pips. There must be a conversion in units of Dollars so you can realize the 1% rule.
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Calculating the dollar value per pips is quite complicated because it involves lots, types of pairs, and the base currency used. You can learn the conversion formula here, or use the pips calculator to get the calculation results automatically.
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