Formula for risking X percentage on a position...

Hey all,

This is my first post in this forum. I wish I knew enough about what I was doing so that my first post wasn't in the form of a quesiton, but it is what it is.

I'm new to Forex in that I haven't gone live yet. I've taken one FX online course which I believe now to have been an utter waste of money. I've read Forex Made Easy by Dicks and am in the process of reading Trend Following.

All this, and I still haven't discovered a formula for the following:

I want to risk X percent (1,3,5,10) on a position. If each pip is worth Y (8-10, 1 on a mini) dollars, my risk reward is 1:2, but my trading range is a stop at -10 pips and a limit at +20 for instance, what leverage needs to be used and how many lots?

It seems like there should be a simple equation for this, but it seems evident I simply don't have the understanding of the workings of lots and leverage.

Any and all help would be extremely well appreciated.

Might as well get them out of the way now...

Events. I know scalping isn't a highly practised method in the forex, at least by many who're successful. Still, to the untrained eye, my own, there seems to be a point hours before the an event release where there's a breakout. Could one just jump on the bandwagon with a trailing stop, with little risk involved?

Also, a method that I've been tossing around, I call it stacking, I've seen it called pyramid. If on longer term trades your position goes the anticipated way, how realistic is it to add more to your position at given intervals, in hopes of exponetially increasing gains?

Okay, I'm done for the time being.

I have an excel file that is exactly what you want

Send me a private message with an email address you would like it sent to and I'll fire it off to you.

lonespruce.

Here it goes,

Total Capital = C
Risk per position as percentage of capital = X (As you mentioned)
Risk/Reward: 1:2
Risk/Reward Range: 10/20 pips
Pip Value: Y (As you mentioned)

So basically, you are willing to risk only 10 pips on every position and not exceed the X percentage at the same time...

Therefore:

XC = 10Y

Your Capital (C) must be known, your risk percentage must be known (X, how much percentage are you willing to risk out of your capital for the position), and you will be able to get the pip value from the equation (Y)...

After you get Y, you get the lot size which you are going to open the position at....

If Y=1, lot size = $10k or 1 mini
If Y=5, lot size = $50k or 5 mini
If Y=9.7 lot size = $90k or 9 minis

Or in brief, Lot size = $10,000 x Y

And so on...


For example, if your capital is $22,000, you are willing to risk only 2.5% of your capital on any single trade, then the pip value should be:

2.5/100 x $22,000 = $550 = 10Y ---> Y=$55

For Y (Pip value) to be $55, lot size must be $10,000 x $55 = $550,000 or 55 mini lots or 5 standard lots + 5 mini lots (Whatever you like to call them )


Thanks,

Nader

Awesome, exactly what I was looking for. Thanks a million.

Anytime


Thanks,

Nader