Calculating position sizes for my trades

Beginner Questions
1

Hello,

I’m on the lesson for positions sizes and I’m not 100% sure I understand how to properly calculate the position size for a trade. I have tried working some examples of my own and I’m not convinced I’m doing it correctly. Please see my below example and tell me if I’m wrong when calculating position sizes. I mean if I’m doing the steps correctly not if the math is right :smiley:

Say I have an account of 10.000$ and I’m trading EURUSD.
I decide to enter at 1.10200
I use the blue line as support and place my stop loss right below it at 1.09800.

stop_loss
stop_loss1702×806 112 KB

Steps for determining position size for a trade:

  1. Determining account risk:
    Account_Risk = 100$. (Maximum 1% on any trade)
  2. Determining trade risk for this particular trade:
    Trade_Risk = 1.10200(buy value) - 1.09800(stop loss value) = 0.004(40 pips)
  3. Choosing Pip value:
    Pip_Value = 0.1$ because I want to have the position size in micro lots.
  4. Calculating position size:
    Position_Size = Account_Risk / ( Trade_Risk * Pip_Value) = 100$ / ( 40pips * 0.1$ ) = 100 ulots

So for this one trade I should buy no more than 100 microlots to stay within my planned risk management rules(no more than 1% of my account on any trade).
For the next trade I will modify the Account_Risk(to be 1% of whatever value the account will be), Trade_Risk value after I chose my entry and stop loss and recalculate the position size. The account_risk of 1% should stay the same for all trades. If I do this long term I will have an average not more than 1$ of my account risked per trade(not very sure of this one last statement).

Please tell me if this is correct way of determining position sizes and what could be improved. Thanks!

2

I’m going to point you to the position size calculator here on the site.

It’s simple. I use it all the time.

  • Put your available balance: $10k
  • Percent risk: 1%
  • SL: 100 pips
  • Pick your pair.
  • Hit Calculate.

Presto!

Position size comes out in fractional units and lot variations You’ll need to make some adjustments if you’re using leverage, or if leverage is apply in your account, but you DON’T want to use it. That can be done with position sizing. Hope that helps!

3

Thanks for the answer. I’m aware of that calculator. I just wanted to know if I understood the way position size should be calculated I was a little bit confused with the SL because all the guides were saying ‘choose your stop loss first then use it in the formula to calculate the position size’. And I did not know how exactly you choose this stop loss. I guess you have to identify some sort of indicator such as a resistance/support line and choose your SL according to that and then calculate your position size. Is that correct?

P.S.: Sorry if my questions seems very simple or if it doesn’t make much sense :smiley:

4

tmp-cam-3394623431996307840
tmp-cam-3394623431996307840753×1632 97.7 KB

tmp-cam-2137969253164139077
tmp-cam-2137969253164139077849×1632 119 KB

For example If price reach at somelevel,it means your prediction is ivalid, that is where you should place your stoploss,
Often people use recent high/low, S/R level , ATR from entry etc, as stoploss

Did my answer make more.confusing?
Im.sorry for that

5

Give this a read. Recent discussion on setting your stops.

6

Oh yes, you have understood the position quite well. You can use the position size calculator instead of doing the calculations manually.

7

Hi,
I’m using leverage, could you explain how to make adjustment?
or, could you point me any position size calculator that including leverage as parameter?

Thank you!