Finally, something I can contribute. I took some time off trading and prepared this, when in actual fact, this should be one of the first things I focused on.
Follow the steps:
First, enter your equity.
Second, enter the percentage you are willing to risk.
Lastly, enter the number of pips you are willing to hold the trade.
Please refer to the picture attached.
The blue boxes will automatically calculated.
You only need to enter inputs in the yellow boxes.
Please inform me if anything is amiss. Download link: bit.ly/lottoenter
Once traders know the potential loss amount, and be comfortable with it. Then they can stretch how many pips it would take to reach that lost amount, understanding their risk better and more confident on taking the loss or even set a hard stop loss.*
I am sure this is available before I created it… But just didn’t seem to find it…
Your calculator only works for pairs of the form XXX/USD (for example, EUR/USD or GBP/USD).
For any pair in which the USD is not the quote currency, your calculation must include a currency conversion.
Study the [B]Babypips Position Size Calculator,[/B] which Joe Ng referred you to, and you will discover your error.
It’s admirable that you have figured out position-sizing (for XXX/USD pairs) on your own. But, it’s really much easier to just use the Calculators which have been provided to you.
Regarding babypips’s position size calculator. I don’t understand why leverage wasn’t taken into account. Can anyone shed some light on this ? Thanks
Firstly, a “well done” award to Babepips for a great effort! Even if a better version of the tool [I]does [/I]already exist on this site, it is always good practice to try building these types of tools oneself on, e.g. excel as it really helps in understanding what are the actual mechanisms are.
The reason why leverage is not included, IMHO, is because this tool is concerned with your equity risk in currency units and is using the pip value per micro lot to calculate how many lots x pip value x stoploss size = your risk percentage in currency units. Leverage does not affect the pip size per lot. The effect of leverage is to determine how much [I]margin [/I]your broker is going to require if you open that many lots. This is, of course, a valid issue - but a different issue.
Thanks manz. Question if all variables in babypips’s position size calculator remain the same. And let says investor x have a leverage of 1:10 whereas investor y have a leverage of 1:100. What does that mean . Mind to give some example ? Investor x would be able to tank more when compared to investor y before getting a margin call?
Joe
If two traders have identical positions then the profit/loss movements on their accounts resulting from price changes are identical regardless of their leverage. The only difference is in the [I]initial [/I]margin required by the broker for the position size.
The other end of the same stick is that different leverages mean a difference in the size of positions for the [I]same [/I]amount of margin.
You want to rent a car to travel. There are two companies offering the same cars with identical km cost of, say, 10 cents/km.
One wants a damage deposit of USD200 and the other USD500 - both refundable on return less distance costs. Your travel costs will be the same from both companies, the only difference being how much money you have to deposit upfront.
The calculator is only concerned with how far you can travel for a given amount of cash, not with how much deposit you have to place upfront.
Perhaps not an ideal analogy but hopefully gives some idea!
