Hello, Dean
In order to answer your question, more information is required than you have provided.
Booking a net gain of 400 pips every month is a significant accomplishment. But, it doesn’t tell us [B]how much money[/B] those 400 pips earned for you. To get that information, we need to know your position size.
To keep things simple, let’s say you make those 400 pips in one trade, and let’s say that you repeat this month after month.
If that one trade involves [B]one micro-lot,[/B] then 1 pip is worth about $0.10, and 400 pips is worth about $40 total profit for the month. For the first month, your account would grow 1.6%.
If you made the same one-micro-lot trade, month after month, the [B]rate of growth[/B] in your account would decline gradually, as your account balance gradually increased. In order to keep growing your account by 1.6% per month, you would have to increase your position size in proportion to your growing account balance.
Now consider trading [B]one mini-lot,[/B] instead of one micro-lot. One mini-lot = 10 micro-lots. So, in this case, 1 pip would be worth about $1, and your profit for the month would be about $400. That works out to a 16% rate of growth in your account the first month.
[B]Risk percentage and position size[/B]
Babypips has a Position Size Calculator, which you should become familiar with. It asks you for 5 bits of information: your account currency, your account balance, your risk percentage, your stop-loss (the missing bit of information in your example), and the currency pair you are trading. When you enter those pieces of information, the Calculator will compute your position size.
Going back to our hypothetical one trade per month, above, let’s say that you are trading the GBP/USD pair, and let’s say that your trade involves a 40-pip stop-loss. You have specified a 1% loss limit, which means that, if this trade goes bad and you get stopped out, your 40-pip loss will cost you 1% of your account (that is, $25). Now we can figure your position size, and from that we can figure how much money a 400-pip gain will generate. Then, obviously, we can calculate the percentage gain in your account.
The Position Size Calculator tells us that you can trade 6,250 UNITS of base currency (if you have the sort of forex account that lets you trade in UNIT quantities), or you can trade 6 micro-lots (if you have a micro account).
Let’s say you have a micro account, you trade 6 micro-lots, and you earn 400 pips. The dollar-value of your 400 pips will be $240 (at $0.10 per pip per micro-lot x 400 pips x 6 micro-lots). And a $240 profit represents a percentage gain in your account of 9.6%.
If you placed this same trade, month after month, and made the same 400 pips every month, you would have to increase your position size in proportion to your increasing account balance, in order to keep growing your account by 9.6% each month.
Here’s where you can find the Babypips Position Size Calculator:
Click on [B]Tools[/B] at the top of this page, then click [B]Forex Calculators[/B], and then cliick [B]Position Size Calculator.[/B]
Does it surprise you that your [B]100:1 leverage[/B] has nothing to do with this calculation? Think about that.
