Now, I am asking all this is because I have entered second stage of evaluation with a prop firm and the leverage has been dropped from 1:10 to 1:3
My question is if my leverage is 1:3 then what is the max position size I can use. Please help me with an easy way to find this
All the articles are so confusing with standard lots, mini lots etc… Why does the forex world give so much weightage to pips when there are 5 decimals in reality? 4 decimals were used by old school brokers
For eg - If I were trading shares and I had 100 USD in my account and 1 share cost me 100 then I could buy 1 share.
But if the broker gave 10x leverage, then I could buy 100*10 =1000 quantity (Simple as that)
Why use such mumbo-jumbo when all you have to decide what is it you are going to enter in the volume box in MT4?
Now, I don’t bother to know all this because normally before placing a trade I decide my SL.
Then I divide my risk amount/ pips (Been trading from years)
If leverage is low as 1:3 then — Is it better to take multiple 1:1 or 1:2 RR trades or place few trades with high RR ratio?
Leverage will define how much Lots (or Volume) you can use when opening a trade.
If you have higher leverage you are able to open higher lot size. If you open higher lot size you will risk more per pip because value of one pip will worth more.
For example if you use EURUSD pair:
1 lot = $10 per pip
0.1 lot = $1.0 per pip
0.01 lot = $0.1 per pip
If you have leverage 1:3 and 50 000 on your account then you will control 150 000.
This will allow you to open at least one standard lot (1.0) which is equal to 100 000 units. So you are left with 50 000 which can be used to open more orders if you have free margin.
Broker will usualy use 1-2% of your account balance as a margin.
So, in your case 1% of 50 000 would be 500.
Now, you are left with 4500 as a free margin.
In this example you have open 1.00 lot where 1 pip will be equal to $10.
You have space to lose 4500 before you reach your margin and you end up with closed trade. That is equal to 4500/10 = 450 pips.
If you increase lot size to 1.5 lots:
You will open size that is equal to 150 000 units which is equal to the amount you can control with your leverage 1:3.
In this case you will not be able to open a trade, but you will need to lower lot size.
Maybe this article will give you more details about situation when you have different leverage on your account:
This is a big question mark for many and I’ve been reading a lot to find a solution. What I find confusing is that you can trade with an RRR of 1:2 and still lose while sometimes you trade with less than 1 RRR and still remain highly profitable. If you go by the books, even they state that you need to trade with an rrr of 2:1 or higher, and that too without even knowing what the other parameters of trading are. So finally, what I’ve realized is that there’s no good or bad risk reward ratio. All that matters is how you use it. When in doubt, I always turn to my brokers fxview and etoro who’ve got the best support team. I have used a lot of brokers and believe me, not all are supportive enough with queries.
Yeah, the risk reward ratio can be pretty tricky. I too got stuck in the same situation before and am still trying to figure out how after following the best RRR ratio, I still lost. I’m the one who goes by the rules and now have started demo trading to work on the strategies again. Thanks for starting this thread and hopefully I shall too get a solution for the dilemma.
