How many lots is too many?

Considering I am a newbie and learning, and need a break from the brain melting education I have going on…I thought it would be fun to look at the more fun side and resolve some curiosity I have.

I know a standard lot is 100k. I know that Forex is very liquid…lol

But how many lots do ‘PRO’ traders trade? I would bet 10 lots of the standard 100k is not uncommon.

How many lots is too much though? Is there a number the big traders won’t go near due to issues of not getting filled?

There is no set answer for this. It all comes down to money management.

Personally I trade 1 minilot for every 5k I have in my account balance. For some that might be too high, for others npt enough.

In the inter-bank market trades of 5 million (50 lots) or even 10 million (100 lots) are commonplace.

with me, 1 -3% margin is considered ok, the larger the more risk

My starting balance was 5000. I never trade more than 150,000 units at a given time. My leverage is set to 50:1

I think the key is proper Money Management which I yet to still have it down.

What I do is calculate my maximum loss and work backwards from there. With a $5k account if you do not want to risk any more than 3% on any one trade, you max loss is $150. If you trade 3 mini lot positions (see my post in your other thread) then your max stoploss is 50 pips per position.

What that means is you should not take a trade where you would need to put your s/l beyond 50 pips to make the trade valid.
So stay away from the GBP/JPY where s/l’s usually need to be 70-100 pips. Find the pairs where a 25-40 pip s/l is more normal. But actual s/l will be based on the conditions you see when you enter the trade, not an arbitrary number.

Well, there are some great answers there but I was speaking from the curious point of view of what is or is not possible in the Forex market.

Rhodytrader got what I was trying to understand. I am curious about what they are doing and what the Forex market possibilities are and power is.

Like how much do the big traders do? How many lots? Is there a point where the market cannot fill the orders for someone…say a big commercial or private trader trying to dump 50 standard lots at once? Maybe 50 is common? How many standard lots do those big boys move in a trade all at once? Do they have fill problems?

This is just conversation. I already know what my possibilities are. 1 or 2 mini lots.

I am just trying to understand what the big boys do and how the market works.

Wow, that is really neat. Now is that private traders that have been successful or is that more likely to be commercial Rhody?

Are there bigger trades that are common and do those guys get fills easily or does it take a few minutes for all lots to enter or exit?

All of the above. Obviously the big transactions are generally the realm of the commercials (trade related transactions) and the hedge funds, but that doesn’t mean an individual - properly capitalized, of course - can’t play there too.

As for getting fills for big trades, it depends on things like pair, time of day, etc. There’s a great scene from the Trader documentary where Paul Tudor Jones is trying to do something like $300 mln USD/DEM (that’s the D-Mark for you younsters :slight_smile: ) early in the Asian session. He couldn’t get it done in one chunk without pushing the market too far, though if he’d split it up into $50 mln blocks it probably would have come off fine.

If you mean how large of trades you have to make before the market can’t handle it any more, I don’t think you need to worry about that.

How many lots is too many? The simple answer is that if you are getting margin calls, you are trading too much.

Amazing. I cannot even begin to imagine that kind of move. lol I do look forward to the day I can confidently trade 1 - 5 standard lots. lol

Trading 5 standard lots is actually nothing if it in fact amounts to no more than 2-3% of your balance or equity. The best way to trade is to use strict money management tactics around 1-3% of your balance or available margin. This 2% rule comes from commodities to stocks to FX. It really is the most sound way to trade so that you don’t sit there and think about the lot to open. I only stick to 2% currently and have for 5 years having come over from stock options trading. 2% rule has worked wonders for me.

Quite true. My strategy is similar.

This is an old thread but never the less, relevant to the question Ive been mulling over in my mind for a while. The question was answered by Rhody in the broadest sense but still left me wondering as to a more specific concrete answer.

I guess another way of asking this same question is:
What is the most amount of lots one could trade whereby your order still gets filled in less than a few seconds?

I figure there must be some tipping/critical point whereby your order takes longer and longer to fill as your order size gets larger and larger. I suppose it does depend on the the time of day and the amount of volume thats currently out there at the time you are attempting to get filled but would it it be safe to say that if I were to place an order at any given time for lets say… 100 standard lots USDJPY…

Would the order encounter filling problems or does all this depend more on the brokerage house you are dealing with? Lets say for arguments sake- a Forex brokerage house like MB trading vs a larger one like Dukascopy? As Rhody said the inter-bank trading easily handles orders of 100 lots or more but I’m not a bank-- what about the smaller retail brokerage houses for the smaller “mom and pop” type trader? What can they handle? Has anybody here traded more than 50 lots or personally knows people who consistently trade more than 50 or 100 lots without any filling problems? If so, who did they trade with?

Anybody out there willing to take a crack at this question?

Risk Management is a huge issue if you want to stay in the game. The levels that you will hear for risk can be as low as 1/4% to 5% or higher. One thing that helps me is to use a risk calculator so I know where I’m at and not over risking on an entry. There is a free one you can download here is the link. euodootrading.com

If you’re facing extreme slippage, you need to start learning how to accumulate and distribute.

I trade 10 lots no problem when my account is 50k or more. I tried 20 lots in a demo once and there was some kind of approval process done to allow that. So I would say that for a retail trader 20 lots or more is going to present some obstacles.

So your broker makes a big deal about trading more than 2,000,000 units? Hahaha, that’s barely an ante at the interbank table. You should have no problem entering orders for up to 10,000,000, and with a good broker, I’m sure they’ll take your order for 100,000,000 , maybe more. And if you want higher, you can always make another order!

The process wasn’t too difficult, it just took a little longer while the trade was approved, maybe it depends on the account type. My broker has 3 “tiers” of trader based on account size, I was in tier 2 so maybe tier 3 has more freedom.

I don’t believe it’s that simple. You are asking to trade 10 million units at a set price. The daily turnover of spot Forex is estimated to be $1.005 trillion according to the Bank for International Settlements. That is $1 trillion across ALL currency pairs.

So, being reasonable, you decide to trade the most liquid pair, EURUSD. According to the Bank for International Settlements study, EURUSD accounts for 27% for the turnover. Thus, $271.4 billion in EURUSD trades. At this point, it becomes very difficult to determine the liquidity of each price tick. Volume data is inconsistent since Forex is decentralized. We all know that a delta in price is the result of supply and demand (i.e. buying and selling). My data feed suggests that the 200SMA for tick volume on the EURUSD is 55535. Other feeds may smooth their tick volume or, conversely, provide greater tick accuracy. It really depends

In any case, I’ll use this value to illustrate my point. You have $271.4 billion exchanging hands per 55535 ticks. That suggests that, on average, $4.89 million exchanges hands across all buyers and sellers, big and small. This is a far cry from the 10 million units you want to trade.

tl;dr = There is a ceiling to the amount of cash that Forex is equipped to transact during any given price tick. If the value of an order exceeds the value of the limit/stop positions at a price level, you’re going to get slippage.

Buying/Selling large positions on any price tick can very well cause a temporary shift in sentiment. It’s all basic economics.