Im lost… when someone says risk 1% of your capital, how do you do it?
Ill try and make more sense.
I have 500 gbp, so I want to risk 5 gbp only. The current price for a pair is 1.5734, and I want to place a buy trade. How do I set risk?? I think its setting a stop loss at x pips away (after figuring price per pip), but another thing is when I set a market execution on mt4 I cant set SL or TP???
Stay determined and get what you want
better idea is not to set ideal on 1% risk but under/above nearest support/resistance level !
too tight SL is FALSE ECONOMY !!!
You do it by setting your Stop Loss and position size.
For example.
If I only want to risk $50 on a trade I will first determine where my Stop is and put that into the order window. Then, I adjust my number of units until amount I’m risking is $50. It might be 2000 units, it might be 10000 units. The platform software does all those small calculations for me. That way, whether my stop is 50 pips or 150 pips; I’m still only risking $50.
I’m not sure about the Limit Order execution on MT4. I use my broker’s platform to execute. There has to be a way to set stops though; that would just be insane if there wasn’t.
And how do you work out how much is value per pip?
Stay determined and get what you want
a simple formula to determing risk is (1% of capital) divided by (distance, in pip, between entry price and stop loss price)
so if i was risking 1% on a £10k account, and the i put an entry order to buy at 1.2000 with a stop loss at 1.1900… the formula would look like £100 / 100 = £1 per pip… so you should only risk £1 per pip. the broker you are using should tell you the value per pip depending on how much leverage you use.
That depends on the leverage you apply to your account, your broker should have a calculator if nothing else so you can determine it.
Is there a risk calculator on BP?
Stay determined and get what you want
Sure, the SL must not be too tight, but that’s obviously a different question. If one wishes to have a Stop that equates to 1% of the available trading funds then clearly it would be important to ensure that the account is large enough to enable the SL to be placed at a sensible level while remaining within the 1%. With smaller accounts, money management rules can in and of themselves cause setups to be rejected as the account is too small to cover the required SL. As successful trading increases the size of the account, this in turn can increase the frequency of tradeable setups.