Position size calculation, lot size and volume in MT4

Beginner Questions
1

G’day, having one of those days where the penny hasn’t dropped yet.

I’m currently demo trading, funded w/$10000 AUD/JPY, 50:1 leverage, trading as I learn so I can incrementally add new elements of strategy as I understand them.

Currently incorporating more risk management principles now calculating position size as per how much I’d like to risk (2%). Up until this point, I’ve been placing orders through MT4 and understand the process minus one element - ‘volume’ on the order window (ranging 0.01 - 8.00 in the dropdown). Can you further select or create more increments when trading live since the scale runs 0.01 - 0.05 then jumps from 1.00 - 8.00?

First things first I guess, what is this volume selection exactly? Am I selecting a percentage of how much of my 10000 account I’d like to use p/trade?

Next, calculating my position size. As stated above, 10000 AUD/JPY, 2% risk, currently exercising 100 pip S/L (the normal variables I’ve been trading when selecting 1.00 or 2.00 volume, however not fully understanding volume).

Am I calculating my optimal position size correctly? Using the babypips example when account denomination is same as base currency…

calculate dollar amount for risk AUD10000 * 0.02 (2% risk) = AUD200

calculate pair converted into counter currency from base (JPY81.5 / AUD1) * 200 = JPY16300

calculate pip move from counter currency 16300 / 100 (S/L) = JPY163 p/pip move

Then its the last bit I get stuck on, calculating my maximum position size when risking no more than AUD200 with 100 pip S/L

As I calculate it… ((10K units of AUD/JPY) / AUD2 p/pip) = 815 000 units which makes little sense to me and seems to be a huge number.

Any help is greatly appreciated, as at this crossroad I’m not understanding how all these principles are tying in to each other.

Cheers

2

• If you want to do it the hard way -- by hand – here is how to calculate position size for this AUD/JPY trade.

Account balance = A$10,000

Pair traded: AUD/JPY

Current price: AUD/JPY = 81.500 (using the price in your example)

A$ risk = 2% of A$10,000 = A$200

Pip-value in ¥ per micro-lot (1,000 units of AUD/JPY) per 100 pip SL = ¥10 x 100 = ¥1,000

Pip-value in A$ per micro-lot per 100 pip SL = ¥1,000 ÷ ¥81.5 per A$ = A$12.27 per micro-lot

Therefore, at your chosen stop-loss level (100 pips), A$200 = A$12.27 per micro-lot

and number of micro-lots = A$200 ÷ A$12.27 = 16.3 micro-lots

• You could skip all these calculations by simply using the Babypips Position Size Calculator.

Here’s how it would look with the pertinent metrics filled in:

Position size calculation - AUD.JPY example.png583×704 29.7 KB

Note that the Position Size Calculator gives you several equivalent choices of position size:

16,300 units of currency = 16.3 micro-lots = 1.63 mini-lots = 0.163 standard lots

Which one you use will depend on what metrics your platform will allow you enter.

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3

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