Hey Everyone,
I thought I would go ahead and share a little spreadsheet tool that I made to figure out what lot size I should be using for my trades.
Before I explain the tool, I want to say that the creation of this tool was based off a compounding spreadsheet that Doggie01 had given to me. After I looked at his sheet I made a comment to him that I was going to add some lot calculations to maximize account compounding. A few days later he asked me to create the updated spreadsheet, so I created a spreadsheet that computed lot sizes and account compounding. About 5 minutes later, I realized the spreadsheet was focused on “winning” pips, and not about Money management. I then decided to simplify the original version and then make the spreadsheet focus on Money Management and not account growth.
In the attached Zip file is the results of this work. I see many new people asking about how to properly size their trades, and they are given the standard 3% MM statement. This tool allows one to figure out the correct lot sized based on both the size of Stop Loss and Percentage of account they want to risk. In addition, I have included a compounding calculation based on expected pip gains per period and lot size.
Now Lets go over how to use the spreadsheet. There are 6 variables that you can change:
Initial Account Size:
This is self explanatory, put how much capital you have in your trading account
Max S/L (Risk) in Pips
This is how many pips you want to risk per trade. For instance, I would not be comfortable only putting a 20pip s/l on trades when I trade based on the hourly charts. In reality, this number should change per trade but for simplicity sake, its set to a standard size.
Max Account risk per Trade
This is your MM rule, I would say most people only want to risk 2%-3%. Put your preferred risk here.
Target Pips Won Per Day
This is how many pips you expect to win per day, and is used for the account compounding portion of the spreadsheet.
Lot Size to Value Multiplier
This is where you enter your expected payoff per pip. This is based on how much you would gain if you were to gain 1 pip. For instance, on my account that is in USD, if I trade 1 lot of EURUSD and gain 1 pip this means I would gain $10, so the multiplier would be 10. Of course different pairs are slightly different, and different account currencies will result in different values. Also, I know that some Mini accounts have a single lot that trades $10000 worth of currency, or $1 per pip. In this case, you would use a multiplier of “1”
Min Lot Size
This is the smallest lot size that your broker will allow you to trade and is used to calculate your proper lot size to maximize proft based on compounding. On my FXDD with Micro lots enabled, my minimum lot size is .01. A lot of account are only .1, and some allow only full lots. Properly setting this number will enable you to maximize your lot size for compounding your account.
Results:
I think the results columns are self explanitory.
Account Balance is based on the account size you entered and your compounding if you use the correct lot size for your trades.
Lot Size is the size of your lot that you should be trading based on your MM rules.
Risk in $ is how much you would risk in your trade if you followed you MM with the given lot size
Won at Target is how much you would win for the period if you hit your pips goal
Good luck everyone, I hope this will help you preserve and grow your account!!! Let me know what we can do to improve this spreadsheet for all to use.
Lot_size_and_compounding.zip (13.3 KB)