Am i calculating risk per trade correctly?

So i am trying to figure out is this correct to calculate risk for my account per trade. So is this a correct way to calculate that:

If i have €100 in my account and i open one micro lot of EUR/USD. In EUR/USD, EUR is base currency to leverage is 10:1 since 1000/10 = 10. Then i put my stop loss order 50 pips from my entry so total amount i can lose is 1000*0.0050 = $5 which is €3.46 on current exchange rate. So percentage of my account that i can lose is 3.46%? Is this a right way to calculate risk of my account balance?

Thank you

Yup. That’s one way it’s done, though in practice you want to derive your position size from the amount you’re risking, not the other way around.

The leverage stuff is basically irrelevant, by the way.

Sorry i don’t understand what you trying to say. Can you please give example?

You have gotten the right answer, but leverage does not figure into the calculation.

Here is the math:

Risk percentage = stop-loss x pip-value x number of lots ÷ account balance

(Note that pip-value and account balance must be expressed in the same currency.)

In your example,

Risk percentage = 50 pips x €0.0692/pip x 1 micro-lot ÷ €100 = 0.0346 = 3.46%

(Note that the pip-value was determined as: $0.10/pip/micro-lot ÷ EUR/USD exchange rate.)

What you mean is that instead of leverage i put in lot size that i have opened and do the calculation.

No, it’s not a choice between leverage or position size. Position size figures into the calculation; leverage does not.

Risk percentage (which is what you want to calculate) is a function of 4 variables:

• stop-loss

• pip-value, in euro per micro-lot

• position size in micro-lots, and

• account balance (in euro).

What I mean is you need to flip the formula around.

Clint put what you’ve done in these terms:
Risk percentage = stop-loss x pip-value per lot x number of lots ÷ account balance

What you should be doing is this:
Number of lots = (risk percentage x account balance) ÷ (stop-loss x pip-value per lot)

In other words, don’t start with position size and figure out what your risk % should be. Start with your risk % and the number of pips you want to risk and calculate position size from there.

When I get home tonight I will try to send a pretty cool excel program that will do rhodytrader is talking about. Pretty simple to use just put in where your entry is and where you stop loss is. Entrer if you are tradeing a full lot mini or micro and and much of your account you want to risk and it will tell you on many lots or whatever to trade. It also has a spot for you projected TP and will warn you if you R/R is below 1/1 or what ever you set it at.

Intresting as I was posting the above someone just posted with about the same thing I made. Mine looks cooler but is about the same thing

http://forums.babypips.com/newbie-island/41609-excel-margin-calculator.html

Yes but do not forget to add in the spread.

Hi Bob, do you mind sharing your Excel prog.