I have been trying to grasp a couple of things and think I might have it but would appreciate if someone can check to see if I’m on the right track.
Position size and risk
Example
I have a micro account of £1000 and will only risk 2% on each trade, so this is the easy one £20
Now I need to calculate my stop loss so can do either of the following based on the £20 I will risk.
£20 \ 0.07 (pip value 1k lot) = 285 pip stop loss if need
£20 \ 0.13 (pip value 2k lot) = 153 pip stop loss
£20 \ 0.20 (pip value 3k lot) = 100 pip stop loss
Your calculation looks correct to me if you are trying to derive how many pips stop loss based on 2% risk and how many lots you wish to trade. However, it is more common for traders to determine a reasonable stop loss level from the price charts, and then work out how many lots to trade they want to trade based on 2% risk. So I would say that your order of calculation is inverted.
[QUOTE=“mark8par;490290”]I have been trying to grasp a couple of things and think I might have it but would appreciate if someone can check to see if I’m on the right track.
Position size and risk
Example
I have a micro account of £1000 and will only risk 2% on each trade, so this is the easy one £20
Now I need to calculate my stop loss so can do either of the following based on the £20 I will risk.
£20 \ 0.07 (pip value 1k lot) = 285 pip stop loss if need
£20 \ 0.13 (pip value 2k lot) = 153 pip stop loss
£20 \ 0.20 (pip value 3k lot) = 100 pip stop loss
Thank you in advance.
Mark[/QUOTE]
It would be dependent on what pairs you were trading as to what the value of a pip is.
Your system will specify your risk (you outlined above that it’ll be 2% so £20), you then decide where you want to place your stop-loss & determine how many pips that is from the current price, then you fire all the info in here:
And it will tell you what position size to buy in order order for the amount of pips in your SL to equal your risk - always round down where applicable.
The way I interpreted your post was that you were relying on the position size to dictate how many pips would be in your SL. I hope that the above helps to clarify things.
If I was to calculate it the way you suggest, how would this be done? Can you show me a formula that I can try please.
I’m trying to keep it simple and would prefer not to use an online calculator to work it out and also I hope to have a better understanding this way.
Thanks
Mark[/QUOTE]
I’m all for keeping it simple which is why I would just rely on the calculator. I can’t be bothered reading it all but I quickly found this in the school, it may help with the calculations (it might be the wrong thing though):
How new to this are you? If you’ve not been through the school, then I would recommend it.
If price was at a resistance level & you expected it to bounce, you wouldn’t need a 285-pip SL. Assuming it’s a smaller timeframe & your confident of the bounce, you’d set your SL to 10-pips above the resistance (this is just an example for arguments sake) & say you enter 5-pips before the resistance just to make sure that your order gets filled, that’s a 15-pip SL. So you then need to either use the calculator or do the calculation to get the correct position size to make those 15-pips equal to the 2% & £20 risk.
Does that make sense? And just to clarify, support/resistance isn’t a set line, think of it as a zone, I’ve implied a line just for ease of making the example.
Your calculations look pretty good; the BabyPips calculator relies on the SL & risk to give you the position size where as using your method, you are relying on the position size & risk to give you the SL. All you need to do is keep incrementing your figures until you get a position size that spits out the amount of pips in your SL. And I’m fully aware that this paragraph is an awkward read, can’t word it too well (sorry).
My advice, use the calculator. Or even find the formulas that it uses etc & create your own excel spreadsheet or something.
I am new to this and have completed the babypips school, its very good for the likes of me with no knowledge. I have also joined the dnb price action as this looks like a great way to trade. I do have a few areas that have just not clicked at the moment no matter how much I read but I am sure it will come.
I’m no expert myself & there was a few areas of the school that has me dumb-founded too so don’t sweat it. I asked many a question as well & just kept reading in the Forum & your understanding develops.
It’s a long road of learning that takes time. I’m not much further up the road from you but if I can help you with anything then I will, just ask.
Sorry Grix Fx, I shouldn’t have put lot, it is a micro acc so I’m trading 1k, 2k or 3k. The max leverage I can use is 200.
Hope that makes a bit more sense.
I do not find the calculator there!..Our position sizing calculator will suggest position sizes based on the information you inputted and various degrees of how far a trade may go against you…
But where is that calculator? Is it on the same page?
The link takes me straight to the BabyPips Position Size Calculator. If it doesn’t for you, go to the “Tools” tab at the top of the page, then down the left side choose “Forex Calculators” & then “Position Size Calculator” - again it’s down the left side.
But the result is same, I think the calculator is not uploading and only the text may be uploading! Thats why I asked you whether the calculator is on the same page or not!
I can see the text around half of the page and half of the page is blank! Technical issue may be it is!
I’m no computer wizard so all I would guess at is clearing your history/cookies/cache. There’s a Bugs/Suggestion bit to the Forum, pop a message in there & the BP moderators normally suggest a fix.