Quick Question about Money Management

Beginner Questions
1

Hi everyone,

I’m new posting but I’ve read through the school and I’ve been reading through various threads on here. This is the best FX community I’ve found so far and I’m happy to learn from/contribute to everyone on here! I’m still in the process of demo trading but hope to open a real account soon!

My question is concerning money management and margin.

I think the best way to describe/ask my question is to use a scenario:

I have a �1000 account. I open a trade with a pip value of 0.5GBP (im from UK btw) and the Margin used for that trade is around �300 according to Oanda. I place a stop loss at 40pips (maximum loss would be 40 x 0.5gbp = 20gbp). I place a take profit at 120pips, so risk to reward ratio is 1:3.

My question is: even though the margin used is �300 (30% of the account value), am I still only risking 2% of my account, given my 40pip (�20) stop loss?

Is this sensible money management given that the margin used is so high? Or have i missunderstood something?

(n.b. the scenario above is just an example and isnt based on any trading system, i only used the figures to give round ratios).

Thanks for your help!

2

You have a vastly different trading style than myself (no worries, so does most people). However, the best way to explain what you are doing is using 30 precent of your account on the trade but with your stops you are correct you only going to risk 1 precent.

Jackie

3

Hi Jackie

Thanks for the reply. I was only using the scenario as an example. Its not actually my trading style. I just wanted to make sure I understood that I would only be risking 2% with a stoploss rather than 30% with such a big margin used.

Thanks