Firstly can I say thanks for a great informative forum and website you have here guys, Really helping me a lot in the Forex Jungle.
I have a question that is confusing me somewhat.
If for example I open an account with 100usd, and I only want to risk 2.5% of my bank on every trade
What Lot size do I need to trade
What leverage do I need to use
I understand I work out the percentage from the amount of pips the stop loss is but I am at a loss what leverage of Lot size I need to use.
Also if i recalculate at the end of each month if/when my bank increases and say I eventually increase to say 10k does my broker automatically change my account from a micro to mini then a standard.
one full lot (100,000) is worth $10 per pip. a mini lot is one tenth of that so a pip is worth $1 per pip. a micro lot is worth ten cents per pip. so how many pips do you want to use for your stop loss? if you have a 10 pip stop loss and you loose the trade then you just lost 10 pips. for a micro lot that 10 times ten cents = 1 dollar lost. in a mini lot thats 10 pips times $1 = $10 lost, with a full lot that’s 10 pips times $10 = $100 lost
lets make it easier to calculate, lets say you risk 2% of your $100, that would be $2 that you want to risk. which with a microlot you could afford to loose 20 pips which equals $2 with a mini lot you can’t even afford to risk 10 pips because that would be a loss of $10 which is 10% of your account.
If you trade a very small account like that, and I do too, then use a broker that allows very small lot sizes.
as for leverage, if you trade a lot size that is appropriate for your account size then leverage doesn’t matter, you don’t even have to consider it. leverage just determine how much money you have to have in your account. so for example if you trade one microlot that’s $1000 of base currency that you are trading. if your leverage is 100 to 1 then you have to have at least $10 in your account to make the trade. if leverge is 10 to 1 then you have to have $100 in your account to make the trade. This doesn’t take into account margin requrements.
if you’re a beginner then trade something like a tenth of a micro account till you get good at it and you should be ok.
your last question, I don’t know, probably not, it may depend on the broker.
[I]If for example I open an account with 100usd, and I only want to risk 2.5% of my bank on every trade[/I]
Use [B]one[/B] lot only until you know what you’re doing. IMHO
These are not separate questions. When you choose your lot size, you automatically determine the actual leverage you will be using. So, forget about the leverage question, and master the task of selecting the proper lot size for each trade.