Good day, can you please help me. I have searched through the Internet but I can’t seem to find the answer. My question is how can I calculate the volume I should enter when placing a trade on metatrader which will allow me to risk 1% of my account? I would appreciate your help a lot thanks.
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It’s possible to do the calculation by hand, and I can walk you through it, if that’s what you want.
But, I’m guessing that you want the easiest way to find the answer. That would not be doing the calculation by hand. That would be using the Position Size Calculator.
Click on Tools at the top of this page. Then click on Position Size Calculator.
You will have to fill in the details of your trade, including your account currency, account balance, risk percentage, stop loss, and the currency pair you want to trade. Suppose your account currency is USD, your balance is $2,000, you want to limit your risk to no more than 1% of your balance, you plan to use a 35-pip stop-loss, and you will be trading the EUR/USD pair.
Here’s how the calculator will look after you fill in this information and click Calculate –
The calculator gives you the answer in 4 different formats, depending on the way your platform allows you to size your positions. For example, if your platform allows you to trade in individual units of currency, then you can trade 5,714 individual units. Or, if your platform allows you to trade in micro-lots (increments of 1,000 units), then you can trade 5 micro-lots, without exceeding your predetermined 1% risk percentage. And so forth.
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Thank you, it makes sense now. I thought volume and lots were two different things
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They really should refer to two different things, but MT4, the most common third party platform in retail forex, uses the term volume instead of lots to apply to trade size. On the MT4 platform, a volume of 1.00 equals one standard lot or 100,000 units (100K) of base currency.
Outside of the MT4 platform, volume is traditionally used to describe the total amount of currency that has been traded by market participants over a period of time.
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Well, I have always been partial to the term “Units” myself. If you are at a party and say, “yeah that mook is a real piker, 2k units on a 1 Mio account” people will turn their heads and say Oooooo Ahaaaaa. Or even better “yeah the volume was massive, I was swinging a yard and submarined/iceberged it in about 5 minutes” now you have something to impress everyone with, you will be the center of the party.
Oh did I mention I like the term Units the best for denoting the size of a trade 
The Never Going To Parties VIPER
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Clint Hello
I appreciate and understand the method using the calculator but could you explain the “by hand method”.
The reason I’m asking this is . I tend to use tools better when I can comprehend what exactly just happened instead of seeing magical results at the end of the day.
could you make the example go both ways going long and short ON THE SAME CURRENCY PAIR and scenario?
Thank you in advance.
Hello Bhoza, and welcome to this forum.
Let’s begin by defining the terms we will use.
Position size. At the beginning of this thread, the OP referred to volume, when he should have called it position size. If you place an order for one standard lot, you are specifying your position size. Volume is something else, altogether. Please refer to Forex .com’s reply (post #4 in this thread), if you are not perfectly clear on these definitions.
Risk. We define risk as the amount in dollars (or whatever your account currency happens to be) that you would lose, if your stop-loss takes you out of your trade.
Pip-value. We define pip-value as the value in dollars (or whatever your account currency happens to be) of a one-pip move in the currency pair being traded.
Okay, now the formula used by the Position Size Calculator can be easily understood.
In my reply (post #2) to the OP’s question, I used the following hypothetical metrics:
- Account balance: $2,000
- Risk percentage: 1% of account balance
- Pair traded: EUR/USD
- Stop-loss: 35 pips from entry point
Note: there is no mention of whether this position is LONG or SHORT. It doesn’t matter. All we care about is the loss generated if the price goes 35 pips in the wrong direction. In other words, if price goes down 35 pips against a LONG position, the loss is the same as if price goes up 35 pips against a SHORT position.
Using the same metrics as above, we can now say:
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The amount at risk has been set at 1% of $2,000. That is, the amount at risk will be $20. And the stop-loss has been set at 35 pips from the entry price.
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In this example, because the quote currency of the pair being traded (EUR/USD) is the same as the account currency (USD), one pip will be worth $10 per standard lot traded.
(If the quote currency and the account currency were different, a separate calculation would be required in order to determine the pip-value.)
Here is the fundamental concept in all of this:
If the 35-pip stop-loss is hit, then the predetermined loss of $20 will be suffered.
All we have to do now is write a formula, involving the unknown position size, that equates the loss in pips to the loss in dollars. Here is the formula:
(Stop-loss in pips) x (pip-value in dollars per lot traded) x (number of lots traded) = (Risk percentage) x (account balance)
Number of lots traded (that is, Position size) is what we are trying to determine. So, we rewrite the equation as
Position size = [(Risk percentage) x (account balance)] / [(Stop-loss in pips) x (pip-value in dollars)]
Substituting all the known metrics, we get
Position size = [1% x $2,000] / [35 pips x $10 per std. lot] = 0.0571428 standard lots of EUR/USD
This result can be rendered as
0.0571 standard lots, 0.5714 mini-lots, 5.7143 micro-lots, or 5,714,280 units of EUR/USD
– which agrees exactly with the results produced by the Position Size Calculator in post #2.
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Clint Thak you! THANK YOU!!!
You hit the nail right on the head. I totally get it now!.
Although I will admit it took me a couple of minutes to digest and referring to my notes but after that, I had my “Aha moment”.
and looking at how long and detailed the reply is I am humbled and appreciate the time you took to help out.
Now I’m hoping you could lend a hand on another matter I’m working on.
Brief summary I’m learning how to beef up my risk management to avoid any further losses from making any uncalculated moves.
I’ll admit though that the is another trader who has been kind enough to help me in the matter, and thanks to him I see the light but I’m not quite out of the tunnel yet.
This is the link to the thread. Understanding Required Margin (going short)
Thank you again and I hope to hear from you.
I will answer you by deconstructing your post #1 on the thread that you linked to.
In the retail forex market, there is no buying or selling of currencies or currency pairs.
In your scenario, you did not buy anything. You speculated (placed a bet) on the direction that the EUR/USD pair would move. You bet that the pair would increase in value – that’s what it means to go LONG.
A currency pair is simply a mathematical ratio. It has no physical existence. You can’t hold a currency pair in your hand; you can’t deposit a currency pair into your bank account; and you can’t buy or sell a currency pair. But, you can bet on where its price will go. That’s what we do in this market. We bet LONG on pairs we think will go up. And we bet SHORT on pairs we think will go down.
The short answer to your question is:
For two equal and opposite trades – one LONG and one SHORT – in the same pair, at the same entry price, with the same position size, the required margin will be the same.
Note: This answer does not apply to simultaneous LONG and SHORT positions. This answer does not describe a hedging situation.
Correct.
However – being a stickler for terminology – I would say that the notional amount of the trade is 10,000 units of EUR/USD.
Refer to my comments above regarding buying and selling (which does not exist in retail forex trading).
Yes, as described above.
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Clint You did it Again!
I’ll start by giving props to the other trader who was kind enough to help out with my question, in the end he managed to give me an answer I understood and believed.
Then you come in! I don’t know if it’s on purpose or some superpower you inherited from the gods of Trading. You took what I understood to a whole nother level . The fact that you went back and mentioned things that many deem obvious even myself was much needed even though I didn’t realize it. Emphasis on the nature of the pair and what we do here Speculate. I know this but it sank on another level as you explained.
Once again thank you! and if (big if) I stumble onto another matter I can’t get my head around Ill contact you to bring you in the conversation. Hoping that is ok with you.
Have a lovely weekend