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What Is "Proper" Risk/Money/Trade Management?

  • #21
  • Jun 2, 2012 6:12pm Jun 2, 2012 6:12pm
Quoting pipmutt
This thread seems like a very long-winded way to work out risk and trade size!

$10,000 equity
1% risk - $100
Stop Loss - 50 pips
$100 divided by 50 pips - $2 per pip
Trade size - ~20,000 units give or take

Margin requirement and leverage are irrelevant calculations in this context.
I got the same result using those figures, and I agree with the margin requirement and leverage being irrelevant too! No one has ever explained how they would affect Position Sizing ???

I often use the Earn Forex calculator, but now I see they have it as an indicator - displays your trade parameters right on the chart, works great for anyone needing that calculation.

Attached Image(s) (click to enlarge)
Click to Enlarge Name: position0.png Size: 400 KB
Click to Enlarge Name: position1.png Size: 230 KB
It takes a lot for me to IGNORE you, but you can try.
  • #22
  • Jun 2, 2012 6:20pm Jun 2, 2012 6:20pm
Quoting FX4Newbies
Hello SlimBuffett,

I was not referring to what is the range allowed in some accounts whether micro or mini. I was discussing what happens with specific position sizes.
Neither was I.

Quoting FX4Newbies
When trading 1 Std. Lot, each pip represents a $10 move in your account balance (roughly).
DUH !


Quoting FX4Newbies
Working backwards...1 Mini-lot would be $1.00 per pip,
What I'm saying is that a MINI account allows you to trade for as little as .10 cents per pip. A MICRO account allows you to trade .01 or 1 cent per pip.

I would guess that a lot of new traders trade on a micro account for as little as 1 cent per pip. Trading real money even @ 1 cent per pip is better than demo.

If you don't really know the difference between mini and micro accounts how are you going to help anyone?
When the Joker is in the deck.. fear not and play it well
  • #23
  • Jun 2, 2012 6:22pm Jun 2, 2012 6:22pm
Quoting Erebus

I often use the Earn Forex calculator, but now I see they have it as an indicator - displays your trade parameters right on the chart, works great for anyone needing that calculation.
That's a useful little tool to have, and it's right there on the chart.
  • #24
  • Edited Jun 3, 2012 6:11am Jun 2, 2012 6:39pm | Edited Jun 3, 2012 6:11am
Quoting Erebus
I got the same result using those figures, and I agree with the margin requirement and leverage being irrelevant too! No one has ever explained how they would affect Position Sizing ???

I often use the Earn Forex calculator, but now I see they have it as an indicator - displays your trade parameters right on the chart, works great for anyone needing that calculation.

Very nice tool there Erebus. Thanks for sharing it. Interesting that they ask for the currency pair....maybe after pip value?

The leverage being used will certainly affect the required margin for a trade. Calculating possible position sizes without considering leverage does not help if the equity is not available for that trade. If it works through your account, leverage may be considered somewhere...but for straight position size calculations it is not required. When trading, the leverage/margin would kick in 'cause if the funds aren't there, the dealer via the platform will pop up a message.

Will take a look at it.

Thanks again,

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #25
  • Jun 2, 2012 6:42pm Jun 2, 2012 6:42pm
Quoting pipmutt
A waste of time?




Right, so why are they included in the discussion and examples, it could be confusing.




There are an infinite number of ways, are you planning on covering them all 'cos we could be here a while!
A waste of time?

Maybe not, if a trader can use the smallest position possible to test the waters....might be a money saver and no more time lost than in a trader if it went sour.


Right, so why are they included in the discussion and examples, it could be confusing.

Please see my reply to Erebus.


There are an infinite number of ways, are you planning on covering them all 'cos we could be here a while!

It's a discussion thread, remember .

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #26
  • Jun 2, 2012 6:51pm Jun 2, 2012 6:51pm
Quoting FX4Newbies

The leverage being used will certainly affect the required margin for a trade. Calculating possible position sizes without considering leverage does not help if the equity is not available for that trade.

FX4
The leverage will affect the margin requirement. Regardless of your leverage, if you risk 3% of your account,

it's just that.

Obviously, you can't take a trade if you have insufficient equity, according to your leverage.
When the Joker is in the deck.. fear not and play it well
  • #27
  • Jun 2, 2012 6:52pm Jun 2, 2012 6:52pm
Quoting Slim Buffett
Neither was I.



DUH !




What I'm saying is that a MINI account allows you to trade for as little as .10 cents per pip. A MICRO account allows you to trade .01 or 1 cent per pip.

I would guess that a lot of new traders trade on a micro account for as little as 1 cent per pip. Trading real money even @ 1 cent per pip is better than demo.

If you don't really know the difference between mini and micro accounts how are you going to help anyone?
Slim Buffett,

My replies to your comments are in black.

I was not referring to what is the range allowed in some accounts whether micro or mini. I was discussing what happens with specific position sizes. (My original post)

Neither was I.

Then later on in the same post you said:

What I'm saying is that a MINI account allows you to trade for as little as .10 cents per pip. A MICRO account allows you to trade .01 or 1 cent per pip.

for as little as .10 cents per pip...that statement implies a range...from as little as.....up to $1.00 per pip in a mini-account.


I would guess that a lot of new traders trade on a micro account for as little as 1 cent per pip. Trading real money even @ 1 cent per pip is better than demo.

Totally agree with that one.


If you don't really know the difference between mini and micro accounts how are you going to help anyone?

I already have helped many....

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #28
  • Jun 2, 2012 6:53pm Jun 2, 2012 6:53pm
Quoting FX4Newbies

A waste of time?

Maybe not, if a trader can use the smallest position possible to test the waters....might be a money saver and no more time lost than in a trader if it went sour.
Nano....demo....same difference pretty much, the nano amount is so insignificant it's unlikely to make any difference to anyone logistically, financially, or psychologically.


Quoting FX4Newbies

Please see my reply to Erebus.
I have....they're still irrelevant.


Quoting FX4Newbies

It's a discussion thread, remember
I dunno, going by your opening posts it sounded like a 'guide' to me....


I think Erebus's tool needs to have an alert on it when people risk too much, sirens and a BIG flashing neon message pops up saying "Are you NUTS!!!"
  • #29
  • Jun 2, 2012 6:59pm Jun 2, 2012 6:59pm
Quoting FX4Newbies
A waste of time?

Maybe not, if a trader can use the smallest position possible to test the waters....might be a money saver and no more time lost than in a trader if it went sour.
You could also waste time and pips by "testing the waters." If you lower your position size on the initial entry, would that suggest that you're not very confident in the trade?

If so, why enter the trade at all? Just a thought.
When the Joker is in the deck.. fear not and play it well
  • #30
  • Jun 2, 2012 7:00pm Jun 2, 2012 7:00pm
Quoting pipmutt
Nano....demo....same difference pretty much, the nano amount is so insignificant it's unlikely to make any difference to anyone logistically, financially, or psychologically.




I have....they're still irrelevant.




I dunno, going by your opening posts it sounded like a 'guide' to me....
Nano....demo....same difference pretty much, the nano amount is so insignificant it's unlikely to make any difference to anyone logistically, financially, or psychologically.

But that's not what I had in mind for entering the trade with a small position. It helps a trader to "feel" the market...like testing the temperature of the water at the beach: no need to jump in from head to toe...just the tip of your big toe would send the same message to the brain.

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #31
  • Jun 2, 2012 7:03pm Jun 2, 2012 7:03pm
Quoting Slim Buffett
You could also waste time and pips by "testing the waters." If you lower your position size on the initial entry, would that suggest that you're not very confident in the trade?

If so, why enter the trade at all? Just a thought.
Not at all Slim Buffett. Once the market confirms that your thinking is correct, you look for the opportunity to scale in with larger positions. Like I said before, most traders seem to open their trade with the position size they intend to trade and just go with it to the end...until the trade is closed: win or lose. That is one style of trading. The approach I am suggesting comes from another, which also has a different "built-in" money/risk management approach.

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #32
  • Jun 2, 2012 7:11pm Jun 2, 2012 7:11pm
Quoting FX4Newbies
that statement implies a range...from as little as.....up to $1.00 per pip in a mini-account.
You're JUST NOT GETTING IT !! It does not imply a range !!
IF YOU HAVE A MINI ACCOUNT YOU CAN TRADE FOR AS LITTLE AS .10 CENTS PER PIP. YOU CANNOT TRADE ANYTHING LESS THAN THAT

IF YOU HAVE A MICRO ACCOUNT YOU CAN TRADE FOR AS LITTLE AS ONE CENT PER PIP.

It is NOT a range. It's the difference between MINI and MICRO[/quote]


Quoting FX4Newbies
I already have helped many....

FX4
I'm sure you have but you still have things to learn, apparently.
When the Joker is in the deck.. fear not and play it well
  • #33
  • Jun 2, 2012 7:14pm Jun 2, 2012 7:14pm
Quoting FX4Newbies

But that's not what I had in mind for entering the trade with a small position. It helps a trader to "feel" the market...
Which one would help prepare you better for competing in the Grand Prix, driving a cheap disposable compact at 1mph or driving a realistic simulator at 150+mph, which one would give you a better 'feel' and prepare you better for what's to come? Neither probably....but the latter is more likely to.
  • #34
  • Jun 2, 2012 7:18pm Jun 2, 2012 7:18pm
Quoting pipmutt
I think Erebus's tool needs to have an alert on it when people risk too much, sirens and a BIG flashing neon message pops up saying "Are you NUTS!!!"
I know what you mean; I'm sure there are coders here that could do that!

Attached Image (click to enlarge)
Click to Enlarge Name: position_warning.png Size: 161 KB
It takes a lot for me to IGNORE you, but you can try.
  • #35
  • Jun 2, 2012 7:21pm Jun 2, 2012 7:21pm
LOL
  • #36
  • Edited 8:16pm Jun 2, 2012 7:23pm | Edited 8:16pm
Quoting Slim Buffett
You're JUST NOT GETTING IT !! It does not imply a range !!
IF YOU HAVE A MINI ACCOUNT YOU CAN TRADE FOR AS LITTLE AS .10 CENTS PER PIP. YOU CANNOT TRADE ANYTHING LESS THAN THAT

IF YOU HAVE A MICRO ACCOUNT YOU CAN TRADE FOR AS LITTLE AS ONE CENT PER PIP.

It is NOT a range. It's the difference between MINI and MICRO

Hi again,

This is where I think this discussion started...Below was your reply...in blue to a small portion of the entire post.

Quote
Quote:
Originally Posted by FX4Newbies http://www.forexfactory.com/images/buttons/viewpost.gif

With a micro, a 10-pip move = $1.00 roughly.
Sorry but that's wrong. A "micro" account trades at (roughly, and as low as) 1 cent per pip. A mini account trades @ (roughly, and as low as) 10 cents per pip.
A mini account is basically the same as a standard account that allows you to trade $10,000
A mini allows you to trade (as little as) $1,000 and it changes from .10 (10 cents per pip) to .01 (1 cent per pip).


Okay...

I was referring to 1 micro-lot that specifically controls 1000 units of the base currency (the position size). I have already stated that in an intermediary post. You continue to say....in "a micro account" you can trade as low as....That's all well and good, but...

Do you see what's happening? I was making a specific point about trading a micro-lot that would control exactly 1000 units of the base currency.

By the way, here's your range: A mini allows you to trade (as little as) $1,000 and it changes from .10 (10 cents per pip) to .01 (1 cent per pip). I was not talking about a range, but about specific position sizes. Are you saying here that 1 mini-lot would generate 10 cents per pip? Do you have in mind accounts that allow you to trade any number of units like Oanda? Trying to understand your point in light of the point I started to make.

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #37
  • Jun 2, 2012 7:32pm Jun 2, 2012 7:32pm
Quoting pipmutt
Which one would help prepare you better for competing in the Grand Prix, driving a cheap disposable compact at 1mph or driving a realistic simulator at 150+mph, which one would give you a better 'feel' and prepare you better for what's to come? Neither probably....but the latter is more likely to.
I just have to accept the fact that you do not yet understand the purpose or value of entering with a smaller position first, before loading your 'big guns".

Take care,

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #38
  • Jun 2, 2012 7:52pm Jun 2, 2012 7:52pm
Quoting FX4Newbies

I just have to accept the fact that you do not yet understand the purpose or value of entering with a smaller position first, before loading your 'big guns"
On the contrary I understand the concept of scaling in and managing risk extremely well. My tongue-in-cheek remark about trading nano lots being a 'waste of time' referred to your comment "I don't know what they call position sizes smaller than a micro-lot".

As it seems you're attempting to create a novice's guide to "What Is "Proper" Risk/Money/Trade Management?" you need to keep the terminology simple and the information accurate and unambiguous, and also exclude references to irrelevant calculations, otherwise it could ultimately be misleading, confusing, and unhelpful.
  • #39
  • Edited 9:11pm Jun 2, 2012 8:03pm | Edited 9:11pm
Quoting pipmutt
On the contrary I understand the concept of scaling in and managing risk extremely well. My tongue-in-cheek remark about trading nano lots being a 'waste of time' referred to your comment "I don't know what they call position sizes smaller than a micro-lot".

As it seems you're attempting to create a novice's guide to "What Is "Proper" Risk/Money/Trade Management?" you need to keep the terminology simple and the information accurate and unambiguous, and...
As it seems you're attempting to create a novice's guide to "What Is "Proper" Risk/Money/Trade Management?"

Not really, but it's an idea LOL.

I think if a trader takes the time to follow my train of thought, it should work out just fine. That's how discussions work best: each listening to the point of the other all the time working toward the goal of clarity in understanding so both can hopefully benefit.

FX4
Trade what you see, not what you think or feel. Let the market come to you.
  • #40
  • Jun 2, 2012 8:05pm Jun 2, 2012 8:05pm
Okay Traders,

Will be picking up where I left off sometime back...maybe tomorrow.

FX4
Trade what you see, not what you think or feel. Let the market come to you.
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