Leverage with risk and position size calculations

Beginner Questions
1

Hi all, over the last few months I have been studying forex and after completing babypips moved on to trial and demo trading. I have been demo trading a strategy with a demo account with infinite money mainly to practise entries and exits and to record statistics of trades (rather than true P/L). I have saw some good results so far and now have come to the stage where I’ve made a demo account of £5000 which is the capital I plan to use and I am going to demo trade entering with exact position sizes to monitor true profit/loss however I am a little confused where leverage comes in at a risk to my capital and how to use the correct position sizes.

My strategy is intraday trading on < 30 minute time frame monitoring price action - I will never have more than 1 trade open and average trades lasts around 20/30 minutes.

The example was done below with my demo account and using the BP calculators

EXAMPLE TRADE

Account balance - £5000
Risk - 1% (£50)

Entry - 1.28058
Stop loss - 1.28008 (5 pips)
Position Size (units) - 128,058
Pip value - £10

Using my demo account broker it allowed me to enter 128,058 units as the position or 1.2806 lots . Where I am confused now is working out how much leverage this is and the risk it has on my account (I am not actually sure on the maximum leverage my demo account as I can’t find it or edit it) - It’s FXCM UK and it says online the maximum leverage is 30:1.

What I am confused with is if I am entering this size of a position/lot is my risk still 1% of my account (£50) or is it amplified with the amount of leverage I am using? I am keeping losses to a minimum and profiting in my demo currently with the correct calculations from the BP calcs but I am concerned if I make a real account and the leverage/margin is configured different, I will be risking more.

I have read a few similar topics but still dont understand fully, perhaps something simple is going over my head

Thanks

2

@Mattt92

5 pips seems like an awfully tight stop-loss. Really doesn’t give you any room to workout the trade.

Have you tried the calculators on the babypips site?

I’m sure others will be chiming in shortly provide more experienced point of view

KC

3

Yes I am on short times frame with 1, 3, 30 minute actively managing the trade.

I can the calculate position size and pip value using the calculators however it is the leverage and the overall risk with leverage I am struggling to understand

Thanks

4

@Mattt92 ,

Here is a post by @Clint from a leverage thread. It might help shed some light. Follow the “Leverage?” link to access the rest of the post.

KC

5

Leverage does give you the opportunity to buy more, but still does not affect your risk calculation if you decide to stick to the same volume of trade. You did not state the exact lot you’ve used, or maybe I missed it. What lot size have you tried?

6

The platform I am using is units so for the example trade above I am entering 128,058 units which is 1.2806 lots.

Originally I had a simulation account with unlimited money.

Now I have made a demo account with £5000 and I am struggling to understand how much I can/should enter. The trade example above all calculates correctly with the worked out pip value when I do enter the trade but I don’t understand the maths behind it