Money Management question

Quoting Togu

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Hi, I am having trouble to calculate how much lot can be used with any given strategy or system. For example if I have this kind of strategy:

Micro Account: 1000USD
Risk per trade: 2% which is 20$
TP=100
SL=50

How much lots it has to be? I use InterbankFX which has micro account.
Also I would like to learn for MINI account as well. please help
Thank you very much in advance

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Quoting Togu

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Hanover thanks for your respond! I'll dig further. I don't know if this is a correct calculation but please have a look at it:

- Assume 1000$ micro account
- Per trade risk 2%
- 1000$'s 2% risk is =20$ . So risking 20$ per trade.
- And then strategy
- Take Profit +50 pips
- Stop L -50 pips
- 20$(2000cents) Converting 20$ into cents= 2000cents.
And then divide 2000/50 Stop Loss = 40
-So can we assume 40 lots per trade with our settings?

How about mini account?

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Quoting hanover

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Togu, this is incorrect because you've changed the $20 into 2000 cents. The correct formula is in my original post. Also, the Take Profit doesn't affect the risk, only the stoploss and the risk %.

To look at it another way:

You are willing to risk 2% of USD 1,000 per trade, which is $20.

Each lot you trade will move price $10 per pip.
i.e.
1 lot = $10 per pip.
5 lots = $50 per pip.
10 lots = $100 per pip.
40 lots = $400 per pip.

0.1 lots (1 mini lot) = $1 per pip.
0.4 lots = $4 per pip.

0.01 lots (1 micro lot) = 10 cents per pip.
0.04 lots = 40 cents per pip.

etc.

Now, your stoploss is 50 pips, so:

1 lot = $10 per pip x 50 pips = $500.
5 lots = $50 per pip x 50 pips = $2,500.
10 lots = $100 per pip x 50 pips = $5,000.
40 lots = $400 per pip x 50 pips = $20,000.

0.1 lots = $1 per pip x 50 pips = $50.
0.4 lots = $4 per pip x 50 pips = $200.

0.01 lots = $0.10 per pip x 50 pips = $5.
0.04 lots = $0.04 per pip x 50 pips = $20.

You want to risk $20 per trade, so the correct answer is 0.04 lots.
________________________

A mini lot is 0.1 lots.
So, at 2% risk and a 50 pip stoploss, the capital you would need is:
50 pips x $10 per pip x 0.1 lots / 0.02 = $2,500.
i.e. you would need a minimum of $2,500 to trade minilots.

But you could do it with $1,000 capital, if you either use a 20 pip stoploss, or by risking 5% (i.e. $50) per trade.
________________________

To trade 40 lots at 2% risk with a 50 pip stoploss would require capital of
50 pips x $10 per pip x 40 lots / 0.02 = $1,000,000.

David

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Quoting smjones

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Here, this indicator will automatically compute it

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