Hi there.
I had a question in regards to the position size calculator. It seems to have all the variables except leverage. Dont I need to input leverage into the calculation, so that I purchase the correct lot size based on my bankroll.
Thanks:57:
The Babypips Position Size Calculator is not broken.
The Calculator uses the following formula to derive the position size for your trade:
Number of Lots = [(Account Balance, in dollars*) x (Risk %)] / [(Stop Loss, in pips) x (Pip Value, in dollars*)]
The Calculator asks you to input your [B]account currency[/B] and [B]balance,[/B] your [B]risk %,[/B] your [B]stop-loss,[/B] and the [B]currency pair[/B] you intend to trade. The Calculator then uses your [B]account currency[/B] and the [B]currency pair[/B] you intend to trade to calculate the [B]pip-value[/B] which factors into the formula above. Leverage does not figure into this calculation.
There are two types of leverage —
• the maximum allowable leverage offered to you by your broker, say 100:1, or 500:1, or whatever, and
• the actual leverage you use in a particular trade, which should be something like 10:1, or less
Neither type of leverage figures into the position size calculation.
[U]After[/U] you have calculated the appropriate position size corresponding to the amount of risk you are willing to take, you can easily figure the actual leverage you will be using, as follows:
Actual leverage = Position size, in dollars* ÷ Account balance, in dollars*
- or any other currency, provided both terms in each formula are based on the same currency
Ok. Thankls
That answer is just too awesome!
