Lot size calculation…? Can anybody help me work this out… even my broker can’t ???
Hi all, I simply want a formula to work out ‘Max Lot Size’… not margin, or any other number… ‘Lot Size’ is the result I am looking for.
For example… here are the details available to work out Lot Size…
I only ever have 1 trade open at any time, so I want to place a trade of the maximum size allowable…
Account Currency - GBP
Account Fund - £1000 GBP
Currency Pair to be Traded - EUR/USD
Current Currency Price - 1.1250
Account Max Leverage - 30:1
Using the above details… what is the maximum Lot size I can trade?
Anyone?? please… I have no idea why this seems to be auch a difficult task to get a clear answer for…? is there a figure or number that is missing to perfrom such a calcualtion?
So, what is your result…? what is the figure you come up with for Max Lot Size…?
And importantly, what is the formula/equation you used to arrive at your number.
This will help me loads so thanks very much in advance for your assistance.
Maximum position will be 30 times as much as your GBP equity in EURUSD… I can’t imagine why you would need to exactly calculate the cost of EURUSD in GBP multiplied by 30 but you could. If you allocate full margin in EURUSD you could get a margin call immediately which would cost you a spread (0.2% x 30 = 6%) in loss.
Work on reducing risk instead of maximizing it and then your calculations can be simple.
Thanks… but that doesn’t help unfortunately… it seems that everybody has their own approach and can’t answer my question in terms that I understand. Given the details I provided… you did not provide a figure in lot size that is my maximum…?.. people seem to ask why do I want to trade maximum size… that is not relevant… but nobody comes up with an answer and their formula… its starting to get weird how I can’t get this info??
You would have to calculate the spot GBPEUR (inverse EURGBP) and then translate that figure (GBP equity into EUR at spot) into EURUSD, that means your “max lot size” would change every minute.
Are you asking what the maximum lot size is that you can open based on those details given or are you asking what the maximum lot size is that you can open so that you don’t lose more than x% of your capital on a trade???
Then it should be easy. Your trading platform should tell you, even if by trial and error, when you have reached the maximum lot size possible based on the capital in your account when trying to open the position.
Bear in mind though: some brokers do have maximum lot sizes or use a tiered approach for lot sizes regardless of capital.
But I know where you are going with this. Don’t. If I am right: some think that they can open a position and use a margin call as their stop loss. You will lose your account.
P.S.
If the above doesn’t help then shout. Somewhere on a backup I have a piece of software that I wrote to calculate FOREX position sizes based on % risk of your capital taking into account pip values and converts to your base currency. (But alright: that is not what you are asking for I realize).
Given the metrics in your question — plus one more metric (EUR/GBP = 0.8677) which you didn’t provide — here is the answer to your question.
The maximum allowable position which you can enter is 34574 units of EUR/USD, which has a notional value of £30000.
The formula is: Pmax = Balance x Leverage ÷ (Base currency/Account currency)
Plugging in the numbers, Pmax = £1000 x 30 ÷ 0.8677 = 34574 units of EUR/USD (rounded down to nearest whole unit of currency)
Unless you trade with Oanda, your trading platform likely will not allow you to trade in individual units of currency. Instead, you will have to round down to the nearest possible number of micro-lots (if you have a micro account), or the nearest possible number of mini-lots (if you have a mini account).
Those numbers are: 34 micro-lots, or 3 mini-lots. (Standard lots are not possible with this size account.)
Let’s deconstruct the formula, to show how it was derived.
If you have £1000 in your account, and you are not allowed to use any leverage, then £1000 is the largest position you can enter.
If you are allowed to use up to 30:1 leverage, then the largest position you can enter is £30000
(30 times the balance in your account). That explains the first two terms in the formula (£1000 x 30).
Now we have to determine how much EUR/USD can be bought (or sold) using £30000. This depends on the exchange rate between EUR (the base currency in the pair you want to trade) and GBP (your account currency). This exhange rate is EUR/GBP = 0.8677, which explains the numerical part of the third term in the formula.
But, we have to know whether to multiply or divide by this exchange rate, and here’s how we figure that out: EUR/GBP = 0.8677 means that €1 = £0.8677, which can also be expressed as £0.8677 per €, or 0.8677 GBP per EUR.
Clearly, we want to divide (not multiply) by 0.8677 in order to get the final result is terms of EUR (not “GBP squared”, which makes no sense).
So, we have completely deconstructed the formula.
Note that the price of EUR/USD, which you gave as one of your metrics, does not enter into this calculation. This same calculation would apply to any pair having the EUR as its base currency (EUR/GBP, EUR/USD, EUR/JPY, etc.).
If you were to enter a 34574-unit position in EUR/XXX in this account, your order would be accepted, because it does not EXCEED the maximum allowable leverage (30:1) imposed on your account. This position would immediately consume all of your available margin.
Also immediately, initial margin (3.3333…% = 1/30) would be replaced by a lower margin requirement, typically called maintenance margin, and typically one-half of initial required margin.
In other words, even before the BID/ASK spread shows up as a loss in your position, the margin used in this trade would be adjusted downward, so that you would have half your account balance tied up in margin used, and half available as free margin.
This free margin would be available to cover the spread on this position, and any losses which might accrue in the position. This free margin could also be used to place an additional trade — however, you have already stated that you hold only one open position at a time.
^^^. That was my point (both of them) (at least for the purposes of this thread).
As Clint noted (here or on another thread): an EXPERIENCED scalper could/would use maximum leverage and maximum position size. I never thought of that.
Then again and given the question being asked: I don’t think we’re dealing with an experienced scalper let’s face it.
I would use a margin calculator to first see what margin I need for a 0.1 lot size. Which is about 293 pounds. I know know that I have about 700 pounds remaining. https://www.fxpro.com/trading-tools/calculators/margin
Since I have 700 pounds, I can just round off 0.79 to 1 pound a pip. Therefore, I can put my stop loss at about 700 pips away from my entry. If I want to double my lot size to 0.2 then my margin is also doubled to about 600 pounds. Therefore, a new calculation is required but I have a good idea of my lot size I will use at this point.
If you do not want to keep your money in USD, you could…
Keep your money in GBP and trade EUR/GBP. This way you will know the exact lot size you can trade as the conversion rate will always stay the same ie. 1 pound = 1 pip. In this case if your margin is 300 pounds for a 0.1 lot size and you 700 pounds remaining, you would say 700 divided by 1 pound (since it is exactly 1 pound per pip) and your trade would close after 700 pips against you. If you think the trade won’t go 70 pips against you, then take a lot size of 1. Get it?
However, keeping your account curreny as USD to trade EU would make 1 usd = 1pip and therefore would make your question a lot easier to answer.
Lot size calculation, required margin or margin requirement which one are u referring to. Could help you know, knowing all of the above is key so you know how to manage positions with your limited margin
