I’m stuck with something. I have a trading account in GBP - I want always to risk 5% of my account balance on each trade. I only trade EUR/USD.
Here’s my calculation (worked fine on my US based account).
(Account Balance * 0.05%) / TradeRisk. My account balance was £1,000 - my calculation told me to trade 90p per pip (when risking 55 pips). When trading EUR/USD my actual money value was 0.58p per pip. Can someone tell me how I can calculate this to always risk 5% of the 1,000 balance in GBP’s? My TradeRisk is 55 pips therefore I should be trading 90p per pip and not 58p. Help me solve please
I hope my post makes sense. It’s a bit confusing for me
Your post is alittle confusing but if you want to not risk no more than 5% of your account then dont risk no more than £50 on each trade. So lets say your trade at a £1 per pip than your stop loss shouldn’t be no more than 50 pips away.
The current price of EUR/USD, and the current price of GBP/USD, will determine the current pip-value for your trade (which is EUR/USD, in a GBP-denominated account).
I don’t know when you got the 58p figure that you’re using, but let’s start over with current figures. As of a few minutes ago, the current price of EUR/USD was 1.2287, and the current price of GBP/USD was 1.5679.
Using the Babypips Pip Value Calculator, we calculate that the current pip-value is 64p [B]for a one-mini-lot position[/B] (that is, for a position size of 10,000 units of base currency = €10,000).
Here’s what this means: If you trade 1 mini-lot of EUR/USD with a 55-pip stop-loss, and then you are stopped out, your loss will be 55 pips x £0.64 = £35.20. But, you want your risk to be £50 for a 55-pip stop-out, not £35.20
So, obviously, [B]you have to adjust your position size upward.[/B]
A simple ratio will give you the solution to your problem: x-number of units / £50 = 10,000 units / £35.20.
That is, x = (10,000)(50) / 35.20 = 14,204 units of base currency.
You may not be able to set your position size to that exact number of units, depending on the trading platform that you are using. If your platform allows you to trade only a whole number of micro-lots (that is, in increments of 1,000 units), then you can use a position size of 14 micro-lots (14,000 units of currency), but not more.
If your platform allows you to trade only a whole number of mini-lots (that is, in increments of 10,000 units), then you can use a position size of 1 mini-lot (10,000 units of currency), but not more.
If your platform allows you to trade only a whole number of standard lots (that is, in increments of 100,000 units), then you can’t do this trade.
The calculation you posted is correct. But, you can skip the step of finding the current pip-value, and let the Babypips Tools calculate position size for you. If you click on [B]Tools[/B] (at the top of this page), then select [B]Forex Calculators[/B]
(from the menu on the left), and then select [B]Position Size Calculator,[/B] you will get this —
If you fill in the required boxes with the numbers we were using above, it will look like this —
Then you click [B]Calculate,[/B] and there’s your answer —
— 14, 254 units, or 14 micro-lots, or 1 mini-lot, or zero standard lots — almost identical to the result we calculated at the beginning of this post, but a lot easier to do!
