Large stoploss requires large trading account?

Every YouTube trader I’ve seen always mentions using the daily timeframe for beginners.

I’m currently looking at NZDUSD. I noticed that in order to make a large stoploss with a small trading account, you need a smaller position size. However, if the trading account is small enough, the position size would be too small even for microlots ($1000).

Does this mean that you need a relatively large account to trade part time? or am I calculating wrong? This is assuming that risk is constant at 1%.

Also weird that plus500 because their minimum position size is $25k with a FIXED 1:300 leverage. It’s like they want us to lose money.

You’re partly right. A stop-loss indicated by a day’s range or 1 or 2 ATR20 could demand a large account to keep the position small enough such that the risk to account capital is no more than 1%. Don’t take large risks to evade this equation.

But the AUD and NZD pairs, plus any pairs with minor currencies (or"exotics") like TRY, RUB, MXN, will require significant margin and have very wide spreads. (which can get very wide around the open, the close, and news announcements.)

Refer to the majors, EUR, USD, GBP, CHF, JPY pairs. Even CAD pairs.

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Thanks for the info. I was looking into AUD and NZD pairs since AUD is my account denomination (also because AUD/USD is super predictable) I’ll stick to major pairs for now, then.

Also, what’s ATR20? And what do you mean by large risk? Do you mean the large stoploss?

Even if you’re based in AUD or NZD its worth checking whether say the major pairs like EUR/USD or USD/JPY or GBP/USD or even EUR/CHF can be more affordable.

AUD and NZD tend to move in step, there’s rarely much between them when matched against other currencies, though AUD/NZD can be interesting.

By large risk I’m not talking of numbers or money, I mean don’t be tempted to trade without a stop-loss or to try scalping or to use capital risks greater than 1% even just for a while until you grow your account.

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AUD & NZD pairs are my fav to trade :slight_smile:

ATR20 is the Average True Range indicator with a 20 candle look-back. If on a daily chart this would be the price difference between the Highest point and Lowest point of each candle (day) averaged over the past 20 days.

Here’s a chart of AUD/CAD, the ATR is around 50 pips a day. Which means at most you could expect/plan to make 50 pips a day. ATR one of my strongly suggested indicators for traders. ATR gives insight on how volatile a pair is, and how much earning potential there is in the currency pair.
https://www.tradingview.com/x/2YUIqmUX/

The calculation for daily charts in normally 1-5 times the ATR and for intraday I’ve seen as much as 10 times the ATR suggest, though I normally stay in the 1-3 times range myself.

Risk management is what separates winners from losers. Knowing when to get in and out is really the smallest concern. Knowing how much to put on the line, how many trades to have open, and setting a tolerable loss amount per trade (risk-reward ratio) should be paramount. It should be the first thing new traders master, but unfortunately it’s usually the last… myself included :rofl:

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You are right. You need more money to hold a position when it is going against you. Some trade requires you to hold for more than one day. You need a least $5000 and smaller trade size to enter longer trades. With small capital you should not use a broker that gives you that kind of restriction. I trade 0.01 lot size with Forexchief broker most of the time when I am testing a strategy. Such small lot will help you keep capital secure in case market turns badly against you.

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If you’re starting out with a very small account (recommended) you may want to open that particular account with Oanda.

OANDA allows you to trade in single units. This means that you can place trades using 1 as your lot size instead of being forced to trade in lot sizes of 1000. This allows you to gain super fine control over your risk.

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Thanks for the tips guys!