For a hypothetical example, if I had an account size of $1000, and I wanted to risk 1%, or $10, in a trade, what would all the numbers (amount per pip, lot size, etc.) look like? Thanks.
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Calculating Position/Risk Sizes
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Calculating Position/Risk Sizes
Hey guys. I'm trying to get my grip on position sizing a little bit. How can I calculate my lot size and such so that I know how much I'm risking, or how much each pip would change PnL before entering a trade?
For a hypothetical example, if I had an account size of $1000, and I wanted to risk 1%, or $10, in a trade, what would all the numbers (amount per pip, lot size, etc.) look like? Thanks. -
Hi yamr682003,
Thank you for your post.
Using an example of USD/JPY
1st Step: 100000*114.28 = 11,428,000
100000*114.23 = 11,423,000
5,000 difference between bid and ask
2nd Step: Determine Midpoint between bid and ask
114.28+114.23 = 228.51/2 = 114.255
3rd Step: Divide the Difference in Japanese yen by the midpoint of the bid/offer
5000/114.255 = 43.76
4th Step: Divide the total US dollar difference by the number of pips to the attain the average pip value at the current value.
43.76/5 = $8.75
Using these steps you can figure the pip value and then determine how many units to trade based on a percentage of your account.Ryan O.NinjaTrader Customer Service
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Good day Brandon,
Just to confirm.
For instance I am trading futures FDAX.
As per the exchange FDAX - 1 contract- 1 point is 25euros,
Hence if I have 100000$ account and I am willing to risk 2% - 2000$ I need 25 eur multiply to EUR/USD exchange rate to get the value in dollars and than 2000 divide by value of 1 contract in dollar in order to know available points?
Is that right?
Regards
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Originally posted by NinjaTrader_RyanO View PostHi yamr682003,
Thank you for your post.
Using an example of USD/JPY
1st Step: 100000*114.28 = 11,428,000
100000*114.23 = 11,423,000
5,000 difference between bid and ask
2nd Step: Determine Midpoint between bid and ask
114.28+114.23 = 228.51/2 = 114.255
3rd Step: Divide the Difference in Japanese yen by the midpoint of the bid/offer
5000/114.255 = 43.76
4th Step: Divide the total US dollar difference by the number of pips to the attain the average pip value at the current value.
43.76/5 = $8.75
Using these steps you can figure the pip value and then determine how many units to trade based on a percentage of your account.
I would like to know if the leverage (e.g. FXCM = 50:1 on forex) is implicit taken into account in these calculations.
Thanks for your help!
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4th Step: Divide the total US dollar difference by the number of pips to the attain the average pip value at the current value.
43.76/5 = $8.75
Thank you very much.
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Dear Patrick
Does this mean that for the same currency pair, I'll get different pip value from each different forex broker since they all offer different spread size?
Thank you.
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'spread size' indicates the distance in price between the ask price and the bid price. This does not change the value or a pip.
Since forex is decentralized, it is possible for different forex brokers to have different 'spreads'. Please contact your potential forex broker directly for questions related to spreads and trading.
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