Hi all,

If I have \$10K equity, and I risk 2% per trade, what is necessary for me to have a per-pip price of \$ 6.67?

This is a setup taken from a spreadsheet provided by ICT some time back.

Thanks,

Mike

That would be a position of about 66,000. Based on your leverage size I don’t know. Im 50 to 1 so I would need a little over 1200 for that position.

Simple math take 2% of \$10,000 (\$200) and divide that by the price per pip you want

\$200 / \$6.67 = 29.9850075

Or

A 29.9 pip stop loss 30 pips might be simpler

I’m going to go out on a limb here and just say… “what?” ICT set up the spreadsheet to reflect earnings of [I]22% per month[/I]. If each pip is worth \$ 6.67 and he profits by 330 pips per month, he will reach his goal. But I don’t understand how he got each pip to be worth [I]that much[/I] money. I don’t understand what the 29.9 stop loss has to do with determining (or leveraging) the price of the pip. While I’m at it, I don’t understand how leveraging say, one micro-lot (\$ 1,000) by say 10:1 without leveraging my risk by the same amount.

Thanks for your help SithJawa and wmorris.

Mike

@Pipowski: I’m sorry if i misunderstood, i was sure that is what you were asking

Maybe this explanation will be better:

There are three factors that determine how much money each pip is worth when you trade with % risk:

Account Size
Risk %
Stop Loss Size

First we know that your account size is \$10,000, and we know that you are only willing to risk 2% of your account balance per trade, which is \$200, so how do you make it so each trade you ONLY risk at the most \$200? Well what is the only risk limiting function in trading? a stop loss! Stop losses vary per system, per market, per everything pretty much, i dont know how ITC places his stops at all so i have no reference point

But what you are saying is you want to find a way to trade with \$6.67 a pip while keeping your 2% risk on your \$10,000 account in tact, so in order to keep your maximum risk of \$200 in tact you need set your stop loss to 30, because \$200 / \$6.67 = 29.9850075 meaning that if you set your stop loss to 30 pips and risk 30 pips each worth \$6.67, you will be just under your \$200 max risk limit

In order to know how ICT’s lot sizes are calculated or how he got those numbers you have to know as i said:
His account size
His % risk
His stop losses

I hope this helps

This is a very important question, those who neglect this would surely fail. Learnt this from my mentor. For your problem, it depends on your stop loss. If you have 100pip SL you would have to trade smaller so that your losses will only be 2%. If you have 20 pip SL you can trade 1 lot and when you lose you only lose 2%. If you trade with 10 pips SL you can trade 2 lots and when you lose 10 pips its only 2% of your account. Please think about the losses first, the winners will take care of themselves

Please take a look here for example,9pipssl2 System | Myfxbook he trades 2% on the very first trade and after that all of the others were 0.5%(risk of the account). This is my mentor’s account. He said this should be how one should be trading. You might wanna check his website on how he sees the market. I have joined the course and he asked to me to read books. Haha. Well you gotta do what gotta do. Adios.

Thanks for this.

So theoretically, I could open a Micro account with \$ 1,000 USD, and leverage the account to 10:1 [I][B]BUT[/B][/I], I have to understand 1) The pip value per pair traded and lot size, 2) The effect any given price change will have on the overall value of the position.

I’m not saying I understand this… I think I understand however, that this little but of obscurity is [B][I]EVERYTHING[/I][/B]. sorry for shouting.

I’m trying to memorize pip value per EUR/USD per lot size so I can begin to grasp what is [I]really[/I] happening. The confluence of dynamic risk management and constantly changing bid/ask is like waving a flag in front of my face while I’m trying to concentrate…

But I don’t feel as stupid as I did a couple weeks ago.

Thanks guys

If I enter a trade on EUR/USD at 1.500, I’ve bought into 150 pips. 2% of that is 3 pips. With a spread of 2 pips, where am I am in terms of avoiding being immediately stopped out?

Really tight S/L are the difficult part for me to understand right now. How do I make them tight enough to keep risk where I’m going to keep it without just getting stopped out [I]all the time[/I]?

@Pipowski: I think there is still some confusion, in addition your comment didnt post for some reason but still went to my email :3

“If I trade EUR/USD (@ 1.5xxx) in a micro lot of \$ 1,000 with leverage of 1:1, my pips are only worth .10. I don’t understand how on Earth he could have gotten his pip value (per pip) to reach \$ 6.67/pip. His leverage would have to be huge - which, as a consequence, would increase his risk to far more than 2% of his \$ 10,000 equity. Is my question clearer? I guess I’m asking if it’s possible to leverage \$ 1,000 cash equity to \$ 10,000 and keep the 2% (\$ 20.00) risk to \$ 20.00. If I don’t then I’m not risking 2%, I’m risking 20% per trade. ICT said you can do this with \$ 100.00 but at 2% risk, the reward ratio has to be large, to say the least, if you’re going to get anywhere with that level of capitalization.”

You have to understand, leverage has NOTHING to do with risk and calculating stop losses and position sizes, let me explain:

if you have a \$1,000 account and you want to risk 2% per trade, that means each trade you will risk \$20 no matter what! 20 REAL dollars of your account, so you have to set your stop loss so that if you get stopped out at the most you will lose \$20 from your \$1,000 account

Imagine you are on your \$1,000 account and you are trading a strategy that uses a 20 pip stop loss, in order to only risk \$20 per trade (2%) you need to make it so your 20 pip stop loss is equal to \$20, meaning each pip would be worth \$1, that would make your lot sizes .1

It is exactly that simple, leverage has nothing to do with it, it isnt even in the equation

What leverage allows you to do is HAVE THE ABILITY to USE more money to trade with then you have, your risk will ALWAYS be 2% of your account size if thats what you set it too

The only reason leverage is important in this situation is because it determines as you said how much currency you can trade with, but not how much of your account is at risk, that being said the smallest leverage is normally 50:1 and i suggest you take as high leverage as possible, leverage DOES NOT increase risk, all it does is allow you to have more trades open at once because you have more money to trade with, obviously for people who have no idea what a stop loss and % risk is they will blow their account but for those who use % risk their are no cons, only added benefits the amount of risk it is POSSIBLE to take increases, but if you are only risking 2% per trade your risk stays at 2%

look at this post by Master Tang 301 Moved Permanently (in fact read all of it, its very informative)

It explains it very well

So in Summary:

regardless of the currency pair you’re entering, whether its long or short, what price it is at, none of that matters to your risk and position sizing assuming you have sufficient leverage, leverage is a GREAT asset, at 50:1 leverage which again is normally the lowest people trade with, you will only have to worry about not having enough margin to cover your trades if you have 5-10 trades open at once, leverage should not be the worry of traders, get a high leverage, increase your possibilities, but always remember to trade with your risk %

Thank you SithJawa and s1quash. I think this is what I was looking for. I have to keep plugging away until the pieces fall into place and this should help immensely.

Mike

It still confuses me how he came up with \$ 6.67 per pip. Or the what this equation can be used for. I may almost be there, though.

It appears it’s calculated from position size and that’s that.

Just forget what ICT taught or told. If you trade eurusd 1 lot then 1pip= 10 dollars. If you trade 2 lots then 1pip=20usd
About the tight SL which he used. That is his edge. I have no comment except that he is an exceptional trader.