I am just beginning to look at FOREX after having traded stocks for more than 2 years. I am confused about the results of the Position Size Calculator here at Babypips:
When I enter GBPUSD and 1000USD account size with 50pips stop loss and 5% risk, the resulting position size is 0.1. I was expecting then that for every pip I lose, I will lose 1 USD because 5% of 1000USD is 500 USD and so I have 50 pips: 50 USD which is a 1:1 ration of pips to dollars.
BUT, when I try this on my IC Markets DEMO account, it seems that when I enter 0.1 Volume, this is too low-- in fact I can enter a 1 volume position and still just lose around that 1:1 pip:dollar ratio (losing 1 pip means losing 1 dollar). That is a 10x discrepancy.
Summary: Babypips Position Size Calculator says I should only buy 0.1 volume to get a 1:1 pip: dollar ratio, yet a demo account on IC markets shows I can enter 1.00 volume and get that 1:1 pip: dollar ratio on GBPUSD, 5% risk, 1000USD demo account with 50 pips stop loss.
The correct position size for your trade is 0.1 standard lot (that is, 1 mini-lot).
The pip-value (which you can figure in your head in this case) is $1 per pip, because the quote currency of the pair you are trading matches your USD account currency, and you are trading one mini-lot. Check this, using the Pip-Value Calculator, if you are uncertain.
These metrics – stop-loss = 50 pips, and pip-value = $1 per pip – match your chosen risk percentage (5%) and risk amount ($50).
As for the different results shown on your trading platform, I can’t speak for your broker or their platform. But, I can promise you this: If you enter a one-standard-lot position (100,000 units of GBP/USD), you will be trading with $10 per pip, not $1 per pip, and your risk (with a 50-pip stop-loss) will be $500, not $50.
I was confusing PIPS with POINTS. Now I know points are NOT pips, rather they are 1/10 of pips