I'm attempting to understand the correct process for determining the position size against the 2% rule as all of the example seem to work backwards from the way you would actually calculate it.
Assuming that you have $100,000 in your account and are looking at a trade that has a stop loss based on technicals of 22. To work out the position size, you merely do this:
MaximumRiskedCapital=100000*0.02=$2000
TradeRiskPerLot=22(Stop) * $10(Pip) = $220
MaximumRiskedCapital/TradeRiskPerLot=9.09
So, 9 standard lots for a total position size of $900,000USD
I think I've read that this is only valid on pairs with a base of USD. Why is this so and how can I add this to my calculations? Lets say I wanted to calculate AUDNZD, how would that modify the calculations?
One last question. Since I have a $900,000 position but only 100,000 it means I have a 1:9 leverage ratio. My demo account however is still at the default 1:100. I guess 1:100 is a maximum limit and not something to calculate? Yes?
Many thanks,
Chris
Assuming that you have $100,000 in your account and are looking at a trade that has a stop loss based on technicals of 22. To work out the position size, you merely do this:
MaximumRiskedCapital=100000*0.02=$2000
TradeRiskPerLot=22(Stop) * $10(Pip) = $220
MaximumRiskedCapital/TradeRiskPerLot=9.09
So, 9 standard lots for a total position size of $900,000USD
I think I've read that this is only valid on pairs with a base of USD. Why is this so and how can I add this to my calculations? Lets say I wanted to calculate AUDNZD, how would that modify the calculations?
One last question. Since I have a $900,000 position but only 100,000 it means I have a 1:9 leverage ratio. My demo account however is still at the default 1:100. I guess 1:100 is a maximum limit and not something to calculate? Yes?
Many thanks,
Chris