Hello everyone, I’m new to baby pips and Forex in general. I just started learning a few weeks ago through a course on Udemy. I then found this site, which is a great addition for continuing my education into the world of Forex. I have been having a tough time not in understanding leverage itself, but how it applies to a lot of the formulas for **Pip Value**, **Risk** and **Lot Size** (*Position Size*). I’ve spent some time playing around with numbers and I think it finally clicked with me. I just want to lay out what I’ve discovered and hopefully you guys can let me know if I’m on the right path or if I’m still misunderstanding it. I think that leverage doesn’t matter when performing these calculations. Leverage only affects the cost you will pay for each of the lot sizes (*Higher Leverage = Lower Lot Cost*).

Here are some things we already know:

## Lot Sizes

- Standard - 1 (100,000 units)
- Mini - 0.1 (10,000 units)
- Micro - 0.01 (1,000 units)

## Formulas

- Pip Value = Lots x 10
- Risk = SL_Pips x Lots x 10
- Lot Size = Risk/ (SL_Pips x 10)

## Broker & Leverage

I live in the US, let’s assume I would use a US broker.

OANDA = 1:50 leverage

## Currency Pair

EURUSD = $1.18453 (As of 10/19/17 - 8:51 AM EST)

This would mean that with a 1:50 leverage I need to supply at least 2% (50/1).

1 Lot EURUSD = $118,453 Leverage = 1:50 (2%) Margin Required = $2,369.06

1 Mini EURUSD = $11,845.3 Leverage = 1:50 (2%) Margin Required = $236.90

1 Micro EURUSD = $1,184.53 Leverage = 1:50 (2%) Margin Required = $23.69

## Calculating Risk & Lot Size

**Account Balance: $3,000 (USD)**

Let’s say I want to risk *5%* of my account balance this would be *$150 (USD) = (3000 * 0.05)*. To calculate the number of lots to purchase or my position size I also need to know the stop loss in pips. Let’s say I want a stop loss of *50 pips*. We can plug in the amount of money we want to risk and the stop loss in pips to get our position size.

Lot Size (Position) = Risk / (StopLoss * 10)

Lot Size (Position) = 150 / (50 * 10)

Lot Size (Position) = 150 / 500

**Lot Size (Position) = 0.3**

This means that we can now calculate our pip value

Pip Value = Lots x 10

Pip Value = 0.3 x 10

**Pip Value = $3/pip**

If we take our pip value and multiply it by our 50 pip stop loss, you can see it comes out to $150. The max I wanted to risk.

But in order to buy a lot size of 0.3, which is equal to 3 mini lots or 30,000 units I’d have to put up **$710.70** assuming my leverage is 1:50.

Does this all sound correct?