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 ?
I also size my positions in the conventional way - according to the pips between entry to stop-loss distance.
As for risk:reward ratios, this is an unhelpful metric and possibly best ignored, when what really matters is profit v’s risk of ruin. If you have a strategy, it probably already has a win rate better than 50%. Although strategies with <50% win rates exist, almost nobody alive ever set out to deliberately find or invent a strategy that loses more often than it wins. Which inherently means 1:1 is an acceptable r:r - as long as the probability of being ruined by a single event is remote or non-existent.
I am no authority but it would seem to me you can calculate your volume the same way you normally do but just reduce the account risk percentage you put on the line. Since there is a general consensus around that risking 1% of your account in a 1:20 leverage environment you can pretty much forget worrying about leverage (unless your trading style keeps a hefty basket of open positions at the same time). It follows that you wouldn’t have to worry about 1:3 if you limit your risk to 0.15% of your equity (= 1% ÷20 *3) and figure out lot size as normal. Just a thought but that is not financial advice.
I don’t think RR ratios have anything to do with volume, but they do matter if your win % is as low as you mention. Good luck on your evaluation.
Erm… there might be something I don’t get here. 0.15 IS below 0.50. You can use the Babypips Position Size Calculator and enter 0.15. Fill all other required fields. The result that will show under ‘Standard Lots’ is what you enter in the Volume box of your order. I hope it works for you. If it does you could try 0.20% for a tad more risk.
Hey Jerry, it is but not that much. I’ll explain it to you in an easy way. When the volume increases, prices increase and when volume decreases, prices decrease. So sometimes buyers’ luck is good and sometimes sellers’. If you are stuck with any of the calculations or you are unable to get along with pips, you can use forex calculators offered by the brokers. I have used one with Turnkeyforex and one was from Oanda. They are pretty reliable.
