I had meant to post some query about money mgt math in the other thread – there is a disparity between my calculated figures and my account figures by one decimal place – but my posting rights in that forum lapsed, guess it’s something I said. I think it would be in context here since some people here have similar or so problems.
Given a $250 bank acc, and a trading strategy like SL = 70p, R = 2%bank, TP = 3R. To find the optimum lot size to trade the strategy.
(i) . Find how change in price on chart will affect account.
For GY = 140.00, 1pip = 0.01, & $/G=1.5630
Then 1pip value = 0.01 over 140 = 0.000714 pound value, times 1.5630 for dollar terms = 0.000111, appx. = 0.0001
For $Cad = 1.0698, 1pip = 0.0001
Then 1pip value = 0.0001 over 1.0698 = 0.0000934 dollar value, = apppx. 0.0001
For G$ = 1.5630, 1pip = 0.0001
Then 1pip value = 0.0001 over 1.5630 = 0.0000639 pound value, times 1.5630 for dollar value = 0.000099, appx. 0.0001
For all other currency pairs, 1pip value will appx. 0.0001 dollar terms.
(ii) . To enter a trade, various choice of lot size
Std. = 1 lot = 100,000 units of base currency of pair
Mini = 0.1 lot = 10,000
Micro = 0.01 lot = 1,000
For 1pip change, effect on account for respective sizes = 1pip value times lot size
Std = $ 10, Mini = $1, Micro = $0.1
For 30p change,
Std = $ 300, Mini = $30, Micro = $3
(iii) . We can then calc 1p,2,3,4,5p,10p, 25,20,25,30,35,40,45,50p, 60,70,80,90,100p, 200,300,400,500,…1000p; and also each pip change by different position sizes like micro – 0.01,.02,.03,…05, mini – 0.1,.2,.3,…5, mini – 1,2,3,…10. We will then arrange everything on a table, that way we’ll never have to calc it again. Here, I have attached the table in pdf.
(iv) . Now, I calc figures for my acc size. 2% of $250 comes to $5. I want that to be my risk ® in the trade. From the table, we can even shade a diagonal boundary of max pip change per lot size in $, and thus max optimum lot size for every intended trade, that fall within R = 2% limit. Not as many as for a bigger account. For SL = 70p, it would limit the options further to only those lot sizes whose 70p move wont exceed $5. For SL = 20p!, not withstanding that it would get triggered more than would allow for any edge whatsoever, we would be able to place heavier lots and still meet R = 3%, thus loose bigger per pip move – someone ought to note that. This is not a “get rich quick” thing, thus TP is usually equal to 12 – 15% or so of the account in bliss weather. Not 70%. And that method for kinda estimating optimum size just wont cut it for long, however anyone does it, but only by knowing it first.
(v) . Last week I figured out something about margin, and I had to laugh. But I still can’t figure why the calculated values don’t correspond with what is on my trading platform history. And its not my broker, its my math. Like now? for the past E$ position, a 0.01 position on platform was raking what a 0.1 on the table shows for every move, also for yen pairs. Could someone figure where the decimal place goes?
pip movt & lot size dollar effect on bank.pdf (13.8 KB)