Good Morning All!
I was wondering if you could answer the following question that I have on risk/position sizing. After reading through a couple of threads I came across the following steps.
Account size = $10,000
Currency = EUR/USD (just so I can use simple numbers)
Stop (based on technicals) = 30 pips
Risk = 2% of your Account = $200
Lot size = Mini = 10,000
Pip value for a Mini lot on EUR/USD = $1
Stop of 30 pips * $1 per pip = $30
Position size = $200 / $30 = 6.67 mini lots.
Since you cannot trade fractional lots (forget Oanda) you must round the position size DOWN to 6. Always round down to be more conservative.
True Leverage = Position Size / Account Size = 60,000 / 10,000 = 6:1
This level of leverage is too high if you lack experience. Better to reduce your percent risk from 2% down to 1%. That will reduce the leverage to 3:1 in this case.”
So I followed the steps and here are my notes below:
- Account Size = $1250
- 2% = $25
- Stop = 50 pips
- Micro lot = 1000 units
- Price per pip = $0.10 (10 cents)
- 50 pips(my stop) * $0.10 = $5
- $25 / 5 = 5 micro lots / 5000 units
- 5000(position size) / 1250 = 4 means 4:1 true leverage
The part that confuses me is when Input these figures into my broker I get different numbers coming up.
Using the above numbers I end up with 25 units(using 1x broker leverage). Therefore the only way to adjust the number of units without changing my stop or changing the % of account risked is to change the broker leverage.
So do I simply adjust the broker leverage to reach the 5000 units position size? Assuming this is it true I would need to have 200x broker leverage. However, 200x broker leverage seems very is high. Could you please advise?
Thank you for your time.