Hi All!
What is the right position size if you have a $1000 account, if you are looking at making $50 per trade?
The key to the calculation is not what you can make, but how much
you are willing to lose. But below is the calculation.
Dependant upon your risk, normally should be 1%, the calculation is:
Account balance/risk percentage = allowable loss per trade
Then
Allowable loss per trade/pip loss = pip size
Then
Profit per trade/pip size = amount of pips required to make the required gain.
So for arguments sake you are using 1% risk & 20 pip stop loss.
Allowable loss per trade = $1000/100 = $10
Pip size = $10/20 = 50cents/pip
Amount of pips required to make the required gain = $50/0.5 = 100 pips
Thats a 1:5 risk reward.
Ok now, based on the above… what is the position size on the MT4? 0.05 or 0.5?
Not knowing which MT4 you referring to I cannot really comment.
The way to find out is to put 1 as the volume then see how much
money is lost when each pip either losses or wins, remembering
to factor in the spread.
You only need to be in a trade a few minutes then go to history &
see entryprice, exit price, money won or lost etc.
From these values you should be able to calculate pip value & position size.