Hello PAG42,
It appears to me that you’re not getting a simple answer to a simple question. Let me ‘give it a bash’.
Levererage, margin, and risk are, to a great extent, misunderstood (although there are many MANY posts around here explaining the difference i.e. I know of at least two of my ‘infamous’ posts on this very same issue).
Let me also say that I’ve not downloaded or checked your Excel Spreadsheet simply because I don’t see the point in your having to go to all the time and trouble of creating an Excel Spreadsheet to calculate your spot FOREX position size, based on your chosen risk percentage per trade, when there are hundreds, if not thousands, of online spot FOREX position size calculators for spot FOREX traders. If you REALLY want me to take a look let me know but I think you’ve gone to a lot of unecessary trouble although you may have personal reasons for doing so and if that’s the case i.e. if you don’t want to use any one of these online spot FOREX position size calculators for a particular personal reason then my apologies for my comment.
Levereage has nothing at all to do with position sizing and the calculation of risk.
Simply put:
If you buy or sell 1 000 units of EUR/USD you will be making or losing $0.10 per pip movement (and I MEAN per PIP movement not by per FRACTIONAL pip movement e.g. 1.4000 to 1.4001 is 1 pip NOT 1.40000 to 1.40001. The latter being FRACTIONAL pip pricing).
It doesn’t matter whether you’re trading at 1:1 leverage or 50 000:1 leverage: the above applies (the 50 000:1 is a personal joke of mine i.e. the actual highest leverage on offer I’ve ever seen has been 1 100:1 seen on offer just last week as a matter of fact). The only difference that leverage makes is how much of your capital is required and ‘used’ as margin to open the position and is then ‘reserved’ (unusable for anything else) while that position is open. Once you close that position (whether it be at a profit or a loss) this amount of margin is ‘returned’ to your capital.
So you need to ‘attack’ this issue from a different perspective. Assuming you have a trading system or methodogy that tells you what your entry price is and what your stop loss price is: you will know how many pips difference there is between the two. You need to then ‘translate’ that number of pips into a $ value per pip movement and from there you can work out what your position size should be for that particular trade.
Why I say that you’re making a lot of work for yourself: it’s easy to do this on a pair like EUR/USD because it’s a ‘given’ that 1 000 units will give you $0.10 per pip movement. But it’s not quite that easy if you start trading currency crosses OR USD/??? pairs and it gets even more difficult if your trading account is not denominated in USD. These online spot FOREX position size calculators take care of all of that (by automatically retreiving the relevant spot FOREX rates and doing the relevant conversions and calculations automatically).
As has been noted: BayPips has one but the number of pairs on which these calculations can be performed is limited. If you’re only interested in trading the major pairs then it’s no problem. If you intend trading more currency crosses or what are known as ‘exotic’ pairs then there are many other spot FOREX position size calculators avaiable on the Internet (for free other than the odd ‘painful in your face’ banner advert in most cases).
The reason that people say that ‘leverage is a killer’ is because high leverage will encourage or ‘lull’ the trader to overtrade their account. Because we’re ‘human’ (and I’m assuming you are): it’s easy to fall into this trap. You may have, say $1 000 in capital in your account and you have high leverage (let’s say 500:1). So you do all your calculations and open your position and you may be using only $5 of that $1 000 (not exact figures i.e. just giving you an idea) to open a position and maintain that open position. But as I said: being ‘human’ it’s easy to think 'but wait a minute: I’ve got all this available margin left so why not open another position, or two, or three, or ten, or twenty)!!! What (new) traders lose sight of (and sometimes ‘old timers’ like me and a few others around here too I’ll wager) is that the NETT or COMBINED exposure (risk) of all of these positions could be 60% of your capital!!! And THAT’S why high leverage CAN be an issue. RISK PER TRADE is the important factor NOT the amount of leverage used.
I hope this makes things clearer. If not: ‘shout’ again. LOL!!!
Regards,
Dale.