If I’m trading with $10,000 on EUR/USD whats the appropriate lotsize to where I’m not risking to much. Right now I’m at 1.0 lots thinking about moving up to 2.0
Hello Kingreadd
I’ve got the answer for you, it is very simple but you will have to switch the variables around until it suits you.
First, decide how much risk is not too much? 1%, 2%, 3% or 4%…5%, 6%, 7% or more?
Then convert that to the Dollar amount or decide on a fixed Dollar amount that you are willing to risk per trade.
if it is 1% or $100, then the lot size you should trade depends on how far away your stop loss is going to be from your entry price.
if it is 100 pips away, then you can risk $1 per lot. If it is 50 pips, then you can risk $2 per lot. If it is going to be 25 pips, then you can risk $4 per lot. None of these lot sizes will exceed your desired amount to risk if your stop loss gets hit.
This is the formula :
Amount to risk in Dollars divided by the distance from the entry price to your desired stop loss price (in pips) this equals the value that each pip should be.
Then, you select the appropriate lot size based on that. You can use a pip value calculator for this but generally speaking, the value of a pip is 10 cents for each micro lot (0.01) traded or $1 per mini lot (0.10) or $10 per lot (1.0)
What lot size you should trade depends on;
How much you are willing to risk per trade and how far away you want your stop loss to be.
Risking 2 lots with a 20 or 30 pip stop loss is the equivalent to $400 or $600 at risk, or 4% or 6% respectively, of the account on a single trade. That is too much by many experienced traders standards but it also depends on your strategy and trading style too.
Do whatever you want to do and happy trading.
2 Likes
Yes, you can really afford to work with such capital almost without restrictions.
Any capital can be lost if you don’t understand how to distribute it, so that you stay as safe as possible.
So don’t increase the risks when there’s no reason to do so and think about your every move.
Much still depends on how many orders you open at one time.
If 1-2, then you can really increase their size a bit. And if you work at once with a large number of positions, then you don’t have to do it, don’t risk it…