m a new trader here and I have a Dilemma. I struggled for over a week now and I couldnt find a solution to my problem. Why position size formulas are different and give different results? For example we took the example in the baby pips lesson on how to position size when the account denomination is the same as the quote currency:
Account denominated in USD
Balance: 5000 USD
Stop-Loss: 200 Pips
- Convert in the percentage risk in the amount of USD you are actually risk :
(5000 x 1) / 100 = 50 USD at risk
- Divide the amount risked by the stop to find the pip value :
50/200 = 0.25 USD / pip
- Multiply the value per pip by a known unit/pip value ratio of EUR/USD :
0.25 x [(10000 Units EUR/USD / (1 USD per pip)] = 0.025 (2500 Units) of EUR/USD
Used leverage = 2500$ / 5000$ = 1:0.5 Used leverage
I tested this result on five different online calculators including BabyPips calculator and the result is the same.
Now another formula from a guy who seems pretty experienced (I don
t know if I can tell the name of the youtube channel here but I wont). This formula is on multiple sources as well with the same result.
This is the formula:
(Acc. Balance x Risk%) / (Stop Loss x Value per Pip). In his video he puts an example that worked with the forex calculator.
The example was:
Acc. Denominated in USD
Account Balance: 10000 USD
Stop Loss 30 pips
Value per pip: 10 USD
The answer when manually calculating the formula was 1 Standard Lot (100000 Units) the same result was in the forex calculator…
When I try to calculate the example from baby pips lesson the result is different:
Acc. Denomination USD
Acc. Balance: 5000 USD
Stop Loss: 200 Pips
Pip value from baby pips example 0.25USD/pip
Result 1 Standard Lot (100000 Units)
Used Leverage: 100000$ / 5000$ = 1:20 Used Leverage
I searched a lot about pip value and I couldn
t find any formula that doesnt ask units (since I need the formula to find the pip value to position size of course that I don`t know the lot size).
Can someone help me with this problem? What am I doing wrong here? I really searched almost everywhere but different answers, I really don
t know which formula is correct and to be honest Im stuck. I really want to go back on my learning. Thank you in advance !