Going through the school is one thing, but getting the information down into my gut, where I can use it seems to be another. I have a basic question about calculating the costs of a trade and it goes like this;
Let’s say I have a live account and I’m trading a micro ($ 1,000)
I want to trade no more than .03% ($ 30.00)
I want 1:1 leverage (no leverage at all)
I’m using VT Trader (CMS Forex) and GFT’s Dealbook 360 demo packages and neither of them will let me set the amount that low. The lowest they’ll both go is 10% (as far as I can tell) of my account, which is unacceptable.
How do I control how much real money is used for a trade if it’s less than the “lot” size?
Well, as I understand it, if you want 1:1 leverage then you must have an account slightly larger than the smallest lot size allowed by your broker.
So, if the broker has a minimum lot size of, say one micro (1000$), then you’d have to have more than 1000$ to be able to open a position and then still have some free margin to cover moves against you. The first 1000$ in your account are all locked in as “security”.
This being said, many or probably all brokers have lower limits for leverage. Personally I’ve not seen lower than 10 times leverage offered (by Oanda).
1:1 leverage is very conservative. Are you sure that this is indeed what you want? You must have quite an account to make anything out of that, or divine patience.
Thanks for your help o990l6mh. I just read a quote on the site here that went like; “He cannot blame the sea, who is shipwrecked twice.” I’m a fool, with not much money and I’d rather lose the foolishness than the money this time, so I’m going to be patient until I [I]really[/I] understand if I can do this or not.
I forgot to mention that I’m only looking at GBP/JPY trades which closed yesterday at 154.30. I think the pips are each worth .00000648 per this School of Pipsology equation: What is a Pip? What Other Forex Trading Terms Do I Need To Know?. .01/154.30=.00000648.
I’m getting slowed by the math because I’m not completely clear on each aspect of calculating risk. Once I get it, I’ll have it for good, but until then I have to ask 3rd grade questions.
I’m not promoting them in any way, in fact I don’t like IBFX due to their sunday candles.
But this tool is quite handy: http://www.ibfx.com/tools/pipcalc.aspx
However like my teacher used to say: you can use a calculator when you know how to count but not before. I’m trying to say that understanding the concepts is key. Once you do, don’t hesitate to make life easier with a tool like this one.
Yes, sort of; for now anyway. I’ll open things up a little more than that, but I’m not shooting for profits yet. And that’s because I do understand leverage enough to use it the most effective way I know how. And since I don’t [I]really[/I] know how, I don’t get to use it (or much of it) until I have a [I]firm[/I] grasp of [I]exactly[/I] what happens when I trigger an entry. Kind of a carrot on a stick, thing.
My first objective is to intelligently enter and exit trades while in really tight control of cash flow. As I pick up confidence and experience, I’ll begin to loosen the stops and increase my percentages. I’m not going to trade at first for profit, but for skill in the game. I never was much of a poker player but Forex is a little different. If I can get better over the next 6 months or so, then I’ll increase my risk.
I’ve heard that Gambler’s Ruin is the downfall of most new traders. Falling victim to spreads and panic trading. Gotta start somewhere, I guess. Might as well be at the very beginning. Thanks for taking the time to help. I appreciate it.
I understand what you’re saying, and agree with it, but leverage has nothing to do with it.
If you want to control your risk tightly just trade 1%, or .1%, or even .01% of your account balance per trade. This will work if your leverage is 1:1, 1:400, or anything in between. The leverage part is irrelevant.
Just divide the dollar amount you want to risk by your stoploss and trade that amount per pip.
Sounds like you just want to paper trade a live account? This is fine.
Phil is right having 1:1 leverage isn’t something you need to concern yourself with.
For instance, you have a $1000 account.
You want to risk no more than 1-2% per trade. What you want to do is determine your position size.
How many lots can you trade based on your maximum stop loss, where your stop loss represents 1% or 2% of your account. If it’s 1% then you can have 10 losing trades before losing 10% of your account. If it’s 2% then you can have 5 losing trades before losing 10% of your account. If your stop loss is a very very tight stop loss, you can risk more lots per trade and still only risk the same amount. Make sense?
When you trade with leverage your broker hold up a certain amount of money, lets say I open a micro lot and my broker holds about 6.5$ ( I trade one micro lot for each 100$ in my account, so if I have 10k in my account whats is my lot size??? if you answered 1 standers lot your right( this is how I use leverage)
if I wanted to trade with out leverage I would trade one micro lot per 1k in my account.
in that case I wold have to lose 100pip to lose 1% of your account
micro lot= 1000$=.01 lot
mini lot= 10,000$=.1 lot
standard lot 100,000= 1 lot
This is how I think about it, I’m sure others have there way.
Jado
That seems to be where I’m stuck. I’m looking at two trading platforms and neither of them allows me to change the percentage.
VT Trader is a 50K demo and the Default Amount window is set to .1 and I can’t reduce it.
Dealbook 360 is a 10K demo and it’s the same issue.
I don’t plan to trade on demo accounts but I have to learn how to use the software. So it’s clear to me that my unfamiliarity with it is causing some problems.
I’m guessing that the default amount 0.1 corresponds to one mini lot size. That is the smallest position GFT allows, and that’s why you can’t decrease it on the GFT platform. Probably same reason on the VT which I’m not familiar with.
Might want to look at Oanda. They have no lot size/position size limits. If you want, you can open a 1$ position…
Agreed, the problem is not your math or your understanding… It’s your broker. Most people don’t want to trade pennies with a 5 digit account, so the broker’s numbers simply don’t go small enough.
Oanda has no lot size limits, so you shouldn’t have any problems if you move to them.
LOL, who’d want to trade pennies (outside of 2nd grade, that is) anyway?
LOL, again! I couldn’t even get my registration to work over there… Tell me the truth, guys, am I destined to trade my pennies all alone?
I’m digesting a lot and thanks to you, it’s beginning to make some sense. I’m even having to figure out how to section out my quotes… I musta pissed [I]somebody[/I] off, [I]somewhere[/I]…
I’m actually not stupid ([I]really[/I] stupid, anyway)
This time I’ve sat down to learn basics I didn’t learn before. Might as well dismantle some bad habits along the way.
I know that .3% trades on a $1,000 micro isn’t much to start with but I’m determined to make it work. I’m starting to get a lot of help (thank you again) and it’s coming together.
I don’t think you’re stupid at all. In fact, the questions you’re asking show that you’re the exact opposite. I hope I didn’t come off that way.
If you’d like to see stupid I’d be happy to point you to a few threads…
I think .3% on a $1000 account is great if your just learning. I did something similar when I went live. I started trading 2% per trade on a $50 account.
You didn’t come off that way at all. And sometime, when it’s possible to be discreet, a few stupid threads might be just what I need to keep me going so I’ll keep that in mind.
How on Earth did you not drown doing $1.00 trades? I heard I should avoid leverage beyond 3:1 or so. Does that mean if I trade 3% of a $1,000 account at 3:1, I’m leveraging $90.00 and breakeven means no win/no loss and a cost of (for GBP/JPY) 7 pips? I’m still trying to figure out how to calculate the value of a pip per account size/leveraged amount/percent of account entered with… I have a headache :o
How on Earth [I][B]could [/B][/I]you drown doing $1 trades?? Remember it’s only $1 on the first one, if you lose the next one it’s 2% of your new balance.
Trading 2% per trade you would need 35 losers in a row to lose half your money, and 114 losers to get below 90% of your starting amount.
I still advise you to stop thinking of leverage! If you trade 2% (or even as high as 5%) you’ll never over leverage yourself. It’s just confusing you… I have my leverage set to 1:50 right now, but I could change it to some other amount at random and it wouldn’t affect how I trade.
Unless you’re using really high leverage to try to get rich quick, you don’t need to worry about it. And you’re definitely not wanting to get rich quick.
Here’s an example…
If you’re trading a $1000 account at 2% per trade you want to risk $20 on your first trade.
Say the trade has a stoploss of 32. $20/32 is .625, so you want to risk 63 cents per pip on this trade.
You simply enter the trade with whatever lot size equals 63 cents per pip. A normal mini account that’s $1 per pip would be .63 lots.
There it is… I can’t say eureka, but that last one is the equation I’m looking for. How to figure out pip value per lot size and how to set stop/loss at what price. Thank you. And thanks for the rich humor… Not wanting to get rich quick…:eek: I smell heresy… or dinner… Hmmm, heretics for dinner!
I found the demo at Alpari US (Metatrader) allows micro lots and customizable settings and I like the interface too, so I’ll start to work with this one. Again, thanks for your help.
