Hi Jeandre de Beer (fxnewstraders),
Thanks for the query. We spoke earlier on the subject. I’m happy to provide more information for you.
To understand, you must be familiar with the concept of lot-sizing, $/pip value, and total gross-dollar return. It's quite simple, and I am confident you can follow.
I’ll use March 2013 as an example. The account's start balance was $119,235.40. In order to earn a 17.41% return, you need to make +$20,770.05 in profit.
If your winning trades are twice the lotsize (and therefore gross-dollar profit) versus your losing trades, it is possible to achieve this net profit despite a losing total pip count. See below:
WINNING TRADES
Total Lots traded: 1,350.26 lots
Total Pips: +1,125.30
Total P/L: +$57,784.95
LOSING TRADES
Total Lots traded: 528.51
Total Pips: -2,206 pips
Total P/L: (-$37,014.90)
As you can see, our trading resulted in a net of +$20,770.05 (+17.42%) while having a total pip count of -1,080.70 (1125.30 - 2206).
It's very easy, really: if you are consistently achieving winning/profitable trades with a lot size that is many multiples higher than your average losing trade (and has a higher $/pip value on winners vs. losers), a trader can make a dollar profit while having a negative pip count. It's quite common, actually, and I'm surprised you're not familiar with it, as all experienced investors are.
Here's another example to do for you, using a single trade:
You have a $100,000 trading account.
You make a 15 lot trade for +50 pips. You make +$7,500.00
You make a 0.04 lot trade for -1,200 pips. You lose -$480.00 (-0.48%)
TOTAL P/L is +$7,020. Total pip count is -1,150 pips. You've made +7% while losing -1,150 pips.
This is why "pip counting" is an amateur habit. Pips have no real relevance or value in professional investing as there is a serious disconnect between pips earned and actual ROI% made.
Professional traders use dynamic lot-sizing and risk control when executing their trades, and it gives them flexible decision making and profit-taking opportunities.
Again, in this instance, PrimeFundFX uses a variety of long-term and short-term trades. A short-term trade, like the 15 lot example above, is taken very often.
Long-term trades, with P/L targets of 0.5% or less, are taken less frequently, but can contribute to distortions on the pip curve.
A 1,000 pip loss on a long-term trade may result in a 0.4% loss, whereas 50 pip gains on larger short-term trades will accumulate exponentially higher % returns and gross-dollar value returns.
PrimeFundFX has executed over 7,000 trade orders since 2010. We execute 200-300 trades per month. These pip deviations can accumulate substantially over such a period.
If you have more questions, please let me know.
Lukas
