Number of lots?

[artieboy]

OK heres my question, obviously the number of lots to trade depends on the individual. But lets say i go with a 2% max loss per trade. My stop loss each time will be 100 pips. Now lets say i fund my account with $10000.
OK at 2% my max loss would be $200. $200/100 pips would be 2.
From this i would trade 2 minilots or 20,000.......Am i correct?
This would work out to 2:1 leverage......
Just curious since i see a lot ofpeople using 50 to 100:1 leverage
a bit puzzled....

[daydreamer65]

Originally Posted by artieboy

OK heres my question, obviously the number of lots to trade depends on the individual. But lets say i go with a 2% max loss per trade. My stop loss each time will be 100 pips. Now lets say i fund my account with $10000.
OK at 2% my max loss would be $200. $200/100 pips would be 2.
From this i would trade 2 minilots or 20,000.......Am i correct?
This would work out to 2:1 leverage......
Just curious since i see a lot ofpeople using 50 to 100:1 leverage
a bit puzzled....

The leverage that traders are talking about is for their trade size,
ie 20 000 units of EUR/JPY = Trade value of $30 000 so when this
is leveraged it will be (@50:1) approx $600, (@20:1) approx $1500.

This is the amount of deposit (or margin) required to trade @ $2/pip.

So when you lose your 100 pips, the deposit (margin) is returned to your
account less the $200.

[artieboy]

Thanks for the response! Alright, so lets say we use your example with the 20:1 leverage......ok, so you have $1500 in your account...
if you lose the 100 pips it would mean
200/1500...losing practically 13.333% ofyour account?
Thats well above the 2% recommended.

Originally Posted by daydreamer65

The leverage that traders are talking about is for their trade size,
ie 20 000 units of EUR/JPY = Trade value of $30 000 so when this
is leveraged it will be (@50:1) approx $600, (@20:1) approx $1500.

This is the amount of deposit (or margin) required to trade @ $2/pip.

So when you lose your 100 pips, the deposit (margin) is returned to your
account less the $200.

[daydreamer65]

QUOTE=artieboy;54683 Thanks for the response! Alright, so lets say we use your example with the 20:1 leverage......ok, so you have $1500 in your account... You would need more in your account than that, $1500 is the margin (or deposit)
to open a position of $30 000.

You would then need X amount to cover losses.

if you lose the 100 pips it would mean
200/1500...losing practically 13.333% ofyour account?
Thats well above the 2% recommended.

[rhodytrader]

Originally Posted by daydreamer65

The leverage that traders are talking about is for their trade size...

I would correct this to say there are two types of leverage traders speak about. One is account leverage or permissible leverage. This is your broker's setting and the leverage which determines your margin deposit for a given sized position (or how much you can trade for your account size). The other is used leverage or gearing, which is position size divided by account size. So yes, it is entirely possible to trade 2:1.

That said, if you're trading EUR/USD (which the pip values suggest is likely) then the value of your trade is up over $30,000, not $20,000.