# Size of position

I will give an example as it is the simplest way to explain what i wanna check whit you.

Lets say that i wanna trade EUR/USD and i am going short 1 mini lot.
The current exchange rate is 1.3000(for example)
So that basically means that size of mine position will be 13 000 units,right?

That is important because of True Leverage.If i have 10 000\$ deposit and i do not wanna have more than 3:1 true leverage than in this case i could hold only 2.6 lots according to true leverage rule.
True Leverage is calculated by divideing total size of all open positions with size of your account.In this case it would be 13 000/10 000=1.3
Or if i go short for another lot than i would have in total 26 000 units so mine true leverage would be 2.6,right??

It came to mine mind as important thing if i am right.But as i am looking in to screen more then 12 hours i am pretty f…d up and i really need help on this one!

I hope that you will get me:D
Regards!
VingTsunKuen

Here i am again after i have rested for the night and mine head is capable to think clearly:)
I had the famous “AHA” moment like Newton did when apple has banged his head:D
So now i am able to explain what was mine point yesterday.
We are going to work it out through examples.

So here we go…

Example 1:

We have opened an \$ mini account with 10 000 deposit.
As we are followers of strict money/risk management rules we do not want to have position in total bigger than 30 000\$ at any given time.
Other words our true leverage should not be bigger than 3:1 at any given time.Our true leverage is calculated by divideing total position size with account size.
Now we can not wait to trade any more so we wanna open USD/JPY position where exchange rate is lets say 109.00.We are going short one lot.
Which means that we are selling base currency(USD) and buying quote currency(JPY)
-10 000\$ +1 090 000 JPY

So basically we have bought 1 090 000 JPY but still our position is worth 10 000\$ which means that our true leverage is 1:1(10 000/10 000=1)

That is so when \$ is base currency.One mini lot will always be worth 10 000\$ in \$ or in currency for which we have exchanged \$.

But what will happen if USD is quote currency?
The story gets pretty much different!

Example 2:
We have opened an \$ mini account with 10 000 deposit.
As we are followers of strict money/risk management rules we do not want to have position in total bigger than 30 000\$ at any given time.
Other words our true leverage should not be bigger than 3:1 at any given time.
Again we can not wait any more,we wanna some action!

We wanna trade EUR/USD,one mini lot @ lets say 1.4700 and we are going short.So we are

``````                               -10 000 Euro        +14 700 Dollar
``````

Wait!WTF is going on now??

As USD moved to be the quote currency size of our position got bigger!
Although we have shorted 1 lot(same as in USD/JPY example) our position size got bigger which means that our true leverage got bigger too and now amounts 1.47:1(14 700:10 000)
This is still ok according to our “3:1” rule.

But till now i did not understand this so i have thought that what i need to do is just not to trade more than 3 lots at any given time.
Buying 3 lots of EUR/USD in above example would mean that i would violate mine “3:1” rule because mine total position size would be 44 100\$(14 700x3)
and mine true leverage would be 4.41:1 which is 1.41 lots more than allowed.

The point is that when USD is base currency 1 lot will always be equal to 10 000\$(if we trade mini lots) ,BUT,
when USD is quote currency you always must calculate your position size according to current exchange rate!

I thing that it is very important thing to know for all of us who are following very strict risk/money management rules.
I think that i got it 100% right.
But in the case that i have stated something wrong please feel free to correct me!
Also i hope that this will help other members as i think that good risk/money management is second most important thing to be successful in the long run when it comes to trading.
Regards!
VingTsunKuen

LOL!!
It looks like i am talking pure bull****!
Not even one comment??

1 mini lot is \$10,000

1 lot is \$100, 000

Your leverage or the pair you are trading does NOT change that.

May I suggest that you open a DEMO account with an ECN broker to familiarize yourself with how this works.

Yeah,leverage in terms of margin which you must put on the table to play the game.That really does not change a thing.You can have 1:400 or 1:20 leverage and only thing what is gonna be different is amount of margin.
In that sense you are right.
[B]BUT[/B],it is so different to have [B]TRUE LEVERAGE[/B] in ratio of 1:1 and in ratio of 50:1 or 100:1
And in that terms i think that one should always calculate what is his true leverage and act according to his risk management rules.
Regards!
VingTsunKuen

Great post vingTsun you attracted my attention to an awesome point i could not see before but there still one question in the mind?

Do you prefere to trade in a high leverge or a true leverage ???

Hey Newton,
TheRumpledOne gave you the answer and you’re still insisting with your “great discovering”.

Your account is in USD, right?
so, you buy 10,000 USD of Euro (or CAD or AUD or JPY)

my account is in Euro, when I open a position short GPB/USD I’m using 10,000 Euro to buy (or sell) GBP