Risk management - pip value & spread

Hi everyone, I have a Q! SFMBE in advance

Trading EURUSD
2 000 $ acc
0,01 lot
leverage 1:25

How wide a pip spread can I afford if I wish to risk 1% of my acc balance?

My broker doesnt offer lower leverage and I dont want to start trading with 2k acc if I can`t account for daily volatility and can get stopped bcs of tight SLs.

You mean how wide a [I]stop-loss[/I], I think? You’re asking how many pips you could afford to lose, without it being over 1% of your account?

The answer is 200 pips (that’s for EUR/USD).

The leverage is not relevant to this calculation.

There’s a free position-sizing calculator you can use, here: [B]Position Size Calculator: Free Online Forex Position Sizing Calculator[/B]

Thank you for answering!

Yes, that is what I meant.

So, with 2k$ acc, trading micro lots and risking 1% per position, I can afford 200 pips wide stop-loss with 1 pip value of 0.1 $.
Well, it seems that 2000 $ account is not really undercapitalized or am I overlooking something?

How does the leverage exactly affects me?

I don’t think you’re overlooking anything.

For trading 1 micro-lot (0.01 lots) nobody could seriously call $2,000 “undercapitalized”.

If you were trading with (say) a 50-pip stop-loss, you’d be able to trade 4 micro-lots [I]of EUR/USD[/I], within a “1%-of-your-account” risk-parameter, etc. You can see how it works.

(Depending on what sort of trading you’re intending to do, 200 pips would be a pretty wide stop-loss, for most people here.)

These two articles are the best “short explanation” I’ve seen, of leverage …

[B]How does leverage work in the forex market? | Investopedia
Forex Leverage: A Double-Edged Sword | Investopedia[/B]

1% of a $2000 account is $20. So if you trade 1 micro lot you can afford to loose 200 pips in EUR/USD as lexys stated. .10 (pip value)X200 (total pips)=$20.

You risk would go as follows for 1% of your account:
1 Micro Lot= 200 pip stop (pip value $0.10) $0.10 x 200 pips= $20
2 Micro Lots= 100 pip stop (pip value $0.20) $0.20 x 100 pips= $20
3 Micro Lots= 66 pip stop (pip value $0.30) $0.30 x 66 pips= $19.80
4 Micro Lots= 50 pip Stop (pip Value $0.40) $0.40 x 50 pips= $20
5 Micro Lots= 40 Pip Stop (pip value $0.50) $0.50 x 40 pip= $20
6 Micro Lots= 33 Pip stop (pip value $0.60) $0.60 x 33 pips= $19.80
7 Micro Lots= 28 Pip Stop (pip Value $0.70) $0.70 x 28 pips= $19.60
8 Micro Lots= 25 pip stop (pip Value $0.80) $0.80 x 25= $20
9 Micro Lots= 22 pip stop (Pip Value $0.90) $0.90 X 22 pips= $19.80
10 Micro Lots= 20 pip stop (Pip Value $1.00) $1.00 X 20= $20

Any more good luck

So based on what strategy you are using will decide where you will put your stop loss. The above will decide how many lots to enter with based on 1% risk of your account balance

Thanks for taking part in this thread!

I want to trade 1 or 2 micro lots in 1 position, taking on 1-2% risk. Swing trading - preferably weekly. But all that is a distant future, I am in a process of learning things and demo trading for now.

Well good luck to you even if you are trading demo it is a good idea to learn risk/position sizing now rather than later. As you progress in will just become natural to you and something you wont really think much about

Hi.
Have you tried the free school on here?

Done with it. Now recapping and slowly applying theory to praxis in a demo account.

The next thing I plan to read is Investopedia´s forex guide and then some books like “currency trading for dummies” by Brian Dolan.

But reading what leverage, pips and lots are is not the same as figuring out what they really mean in live trading.

No, I agree. It takes some getting used to. (Demo account is ideal for that.)

I don’t know that one, but if it’s in that yellow “For Dummies” series, it will doubtless be both safe and good to read: those tend to be both very well written and outstandingly well edited.

Other recommendations for aspiring forex traders …

[I]Trade Your Way to Financial Freedom[/I] by Van K. Tharp (don’t let the sensationalised title put you off: it’s a great book)

[I]Profitability & Systematic Trading[/I] by Michael Harris

I know what you’re saying, but there are 33 more quizzes for you to take. I’m going thru the school myself, not skipping any of it as I’m sure its all there for a reason.
Anyhow, good luck in your journey

I invented a simple forumula your account ballance times .70 x 100

this will keep you safe i should name it something like the fisherman margin

Yep, yellow front page titled “for dummies”

Other recommendations for aspiring forex traders …
[I]Trade Your Way to Financial Freedom[/I] by Van K. Tharp (don’t let the sensationalised title put you off: it’s a great book)
[I]Profitability & Systematic Trading[/I] by Michael Harris

Van Tharp is already on my list among the other interesting titles like “Come Into My Trading Room - Alexander Elder” and “J. Person - A Complete Guide to Technical Trading Tactics(2004)”. It`ll take some time to read them all but I am looking forward to it. Sure will put Michael Harris on the list.

I printed out the complete school of pipsology bcs I prefer reading from paper, so I didn´t bother with quizzes, but I`ll eventually solve them all.

Good luck to you too, hope to compare our tremendous trade results in a few years time :32:

where i can find document for Forex?

There are lots of documents online, all you need to do is a little research.

OK! but i mean what keywords i can search for newbie?

Indeed but also will better if we as trader also improve skill with own selves practice and using knowledge as based insight to implemented on the market I think if in practice always trade with proper plan money management hence we will always safe in trade