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Figure 3% risk over x pips?

  • #1
  • First Post: Jul 24, 2010 2:01pm Jul 24, 2010 2:01pm
How does one figure the appropriate lot size for 3% risked over x pips on USD/CHF & EUR/JPY? Assume fractional mini lots.

For USD based pairs I can Just take the risk % divided by my stop. And then I will get an appropriate lot size.

The problem is the above two mentioned pairs per pip value changes as the currency rate changes.

My borker IBFX has a per pip calculater. But, that is for 1 standard lot at the current price. And does not help me figure what lot size I should have for x risk of account over x pips.

I've worked out my own calculation for USD/CHF. Please check it out and see if it works or if there is something better I could be doing.

UC lot calculation:

3% risk/ 50pips = standard mini lot size over 50 pips / UC current pip mini value = UC lot size.

I have no idea what to do for EJ, any help with that would be appreciated.

Just to be clear I'm NOT trying to figure per pip value for one (mini) lot.

What I'm trying to do is find what would be the appropiate fractional lot size to trade that would be 3% risk of my account over x pips on both UC, EJ.
  • #2
  • Jul 24, 2010 2:51pm Jul 24, 2010 2:51pm
Account balance x 3% divided by number of pips to stop loss divided by price movement per pip = fractional # of units to buy.

So assuming a $1,000.00 balance on EUR/USD:

$1,000.00 x 3% = 30.00/50 pip stop loss = .60 cents per pip/.10 per pip price movement = 6 micro lots .6 mini lots .06 lots
  • #3
  • Edited 9:11pm Jul 24, 2010 9:00pm | Edited 9:11pm
Something is not right with that equation. It ends up making 50 pips on EJ larger than 3% risk of account?

1000 x3% =30 / 50 pip SL = .6 / .8956 ( entrance price per pip from my last ej trade) = .66 lot size.

.66 x 50 =33 (And it will actually come out to more than 33 loss on EJ because of the price per pip increasing with pip movement)
  • #4
  • Jul 24, 2010 9:42pm Jul 24, 2010 9:42pm
Lets assume you have a losing trade on EUR/JPY with a 50 pip stop loss and a beginning balance of $1,000.00. You want to limit your loss to 3% or $30.00.

Account balance x 3% = $30.00 divided by number of pips to stop loss (50) = .60 cents allowable loss per pip. Price moves .1143 cents per 1K on EUR/JPY (although the .1143 fluctuates based on market conditions) so the number of allowable lots would be 60 cents divided by 11.43 cents movement per pip or 5.25 micro lots .525 mini lots or .0525 standard lots. (.60/.1143)

5.25 micro lots x 50 pips x .1143 cents per pip = $30.00

This works the same for every pair. The only difference is the price movement per pip which varies by pair but is usually stated in your quote when you go to place a trade.

You are allowed to lose 60 cents a pip in this example. Dividing 60 cents by the per pip move will give you your answer on every pair.

I'm sorry I'm not a real good teacher.
  • #5
  • Jul 25, 2010 9:59am Jul 25, 2010 9:59am
Quoting sloanman
Lets assume you have a losing trade on EUR/JPY with a 50 pip stop loss and a beginning balance of $1,000.00. You want to limit your loss to 3% or $30.00.

Account balance x 3% = $30.00 divided by number of pips to stop loss (50) = .60 cents allowable loss per pip. Price moves .1143 cents per 1K on EUR/JPY (although the .1143 fluctuates based on market conditions) so the number of allowable lots would be 60 cents divided by 11.43 cents movement per pip or 5.25 micro lots .525 mini lots or .0525 standard lots. (.60/.1143)

5.25 micro lots x 50 pips...
Ok, that makes more sense although I havn't run the calculation myself.

I dont understand where are you getting the price movement per pip Number? Is it from the pairs bid or ask?
  • #6
  • Jul 25, 2010 10:38am Jul 25, 2010 10:38am
Every pairs price per pip is different. The yen crosses typically move 11 cents per pip on a micro lot and EUR/USD AUD/USD move 10 cents per pip. Others vary.

Which broker are you using if you don't mind me asking? On the trading interface it often will tell you the price per pip.
  • #7
  • Jul 25, 2010 10:52am Jul 25, 2010 10:52am
Quoting sloanman
Every pairs price per pip is different. The yen crosses typically move 11 cents per pip on a micro lot and EUR/USD AUD/USD move 10 cents per pip. Others vary.

Which broker are you using if you don't mind me asking? On the trading interface it often will tell you the price per pip.
IBFX through an MT4 interface. Where would I normally see that information if I even have it?
  • #8
  • Jul 25, 2010 11:13am Jul 25, 2010 11:13am
I just looked at the IBFX interface and it does not show price per pip.

I use OandA and it is built right in to the trading interface when you go to place a trade.

Anyone else have a place where this info is readily available?
  • #9
  • Jul 25, 2010 12:11pm Jul 25, 2010 12:11pm
For the JPY and CHF pairs, assuming your account is based on USD, look at the USDJPY and USDCHF quotes respectively and you can find the price per pip.

USDJPY: 100/87.43 x 10 = $11.44 per pip for 100k lot
USDCHF: 1/1.0548 x 10 = $9.48 per pip for 100k lot

I use this simple spreadsheet for calculation.
Attached File(s)
File Type: xls Lot size calculator.xls   23 KB | 395 downloads
"Instead of hoping he must fear; instead of fearing he must hope."
  • #10
  • Jul 25, 2010 1:47pm Jul 25, 2010 1:47pm
Quoting Jliuuu
For the JPY and CHF pairs, assuming your account is based on USD, look at the USDJPY and USDCHF quotes respectively and you can find the price per pip.

USDJPY: 100/87.43 x 10 = $11.44 per pip for 100k lot
USDCHF: 1/1.0548 x 10 = $9.48 per pip for 100k lot

I use this simple spreadsheet for calculation.
how do I adjust that spreadsheet for mini and fractional mini lots?
  • #11
  • Jul 25, 2010 1:54pm Jul 25, 2010 1:54pm
Quoting Jliuuu
For the JPY and CHF pairs, assuming your account is based on USD, look at the USDJPY and USDCHF quotes respectively and you can find the price per pip.

USDJPY: 100/87.43 x 10 = $11.44 per pip for 100k lot
USDCHF: 1/1.0548 x 10 = $9.48 per pip for 100k lot

I use this simple spreadsheet for calculation.
do you use the bid or ask price for the calculation?
  • #12
  • Jul 25, 2010 9:02pm Jul 25, 2010 9:02pm
Quoting Jliuuu
For the JPY and CHF pairs, assuming your account is based on USD, look at the USDJPY and USDCHF quotes respectively and you can find the price per pip.

USDJPY: 100/87.43 x 10 = $11.44 per pip for 100k lot
USDCHF: 1/1.0548 x 10 = $9.48 per pip for 100k lot

I use this simple spreadsheet for calculation.
this way is more complex than another one. It makes some mess conditions, don't want to use this
  • #13
  • Jul 25, 2010 9:59pm Jul 25, 2010 9:59pm
Quoting KumoDragon
how do I adjust that spreadsheet for mini and fractional mini lots?
My bad for not explaining how to use it.

1. I'll use the right side box and key in the live USDJPY and USDCHF quotes for the day to obtain the USD per PIP column.
2. Depending on which pair your trading eg. x / JPY use the JPY quote, key in 11.44 into the "Dollars per PIP (1 Std Lot)"
3. Input the "ACCOUNT BALANCE", "RISK PER TRADE" and "STOP LOSS"
4. "LOTS TO TRADE" will calculate how much to trade in terms of 1 standard lot (100k)
5. The "AMOUNT TO TRADE" is for my Oanda account as I am able to key in the exact amount to trade in USD. If you use a MT4 broker and mini lots (1 lot= 10k USD?), you can change it accordingly. This version should be fine for you.


Quoting KumoDragon
do you use the bid or ask price for the calculation?
It only makes a little difference? Say bid is 87.43 and ask is 87.45, its US$11.4351 and US$11.4377 respective per pip. With mimi lots, it becomes even more insignificant.

Cheers!
Attached File(s)
File Type: xls Lot size calculator (MT4 Mini).xls   23 KB | 349 downloads
"Instead of hoping he must fear; instead of fearing he must hope."
  • #14
  • Jul 25, 2010 10:10pm Jul 25, 2010 10:10pm
Quoting automated
this way is more complex than another one. It makes some mess conditions, don't want to use this
Yeah I agree its not 100% user-friendly. It would be great if you could share yours!
"Instead of hoping he must fear; instead of fearing he must hope."
  • #15
  • Jul 26, 2010 2:26am Jul 26, 2010 2:26am
Quoting automated
this way is more complex than another one. It makes some mess conditions, don't want to use this
ooooooooook care to share ?
  • #16
  • Jul 26, 2010 2:28am Jul 26, 2010 2:28am
Quoting Jliuuu
My bad for not explaining how to use it.

1. I'll use the right side box and key in the live USDJPY and USDCHF quotes for the day to obtain the USD per PIP column.
2. Depending on which pair your trading eg. x / JPY use the JPY quote, key in 11.44 into the "Dollars per PIP (1 Std Lot)"
3. Input the "ACCOUNT BALANCE", "RISK PER TRADE" and "STOP LOSS"
4. "LOTS TO TRADE" will calculate how much to trade in terms of 1 standard lot (100k)
5. The "AMOUNT TO TRADE" is for my Oanda account as I am able to key in the exact amount to trade...
Thanks man. Very useful stuff.
  • #17
  • Last Post: Aug 2, 2010 11:02am Aug 2, 2010 11:02am
Quoting KumoDragon
How does one figure the appropriate lot size for 3% risked over x pips on USD/CHF & EUR/JPY? Assume fractional mini lots.

For USD based pairs I can Just take the risk % divided by my stop. And then I will get an appropriate lot size.

The problem is the above two mentioned pairs per pip value changes as the currency rate changes.

My borker IBFX has a per pip calculater. But, that is for 1 standard lot at the current price. And does not help me figure what lot size I should have for x risk of account over x pips.

I've worked out my own calculation...
Hi KD,

Here's a program that I sent at Sonic thread that should help you. as you said, assuming that you're trading with one standard lot, 1 pip is not equal to 10$ in many pairs. When your profit/lost currency (YYY in XXX/YYY) is USD, you'll not have a problem, but when it changes to other currencies, you should change "coefficient" in the program that I redirected you from "1" (which is set by default for when USD is P/L currency) to another number.

for calculating this number, when your P/L currency is YYY, you should enter the rate for YYY/USD. for example if you're dealing with CHF, you should enter the rate for CHF/USD. you have the rate for USD/CHF, you should divide 1 to that rate and then you should enter the calculated number at coefficient. there is and example how to use it when you drag mouse pointer on top of each text box.

Hope it helps

Regards,
Basber
Trading methods are designed to put the odds in our favor, not predicting.
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