Hi all, Really hope I can trespass on someones time to help with a real life (demo) work through that I am struggling with in correlating the info between position size calculator / risk and the actual figures this produced on my demo account.
So - Demo account on Trading 212.
Account value £500.57 no other open positions.
wanted to enter a trade in EUR/GBP so checked position calculator.
Position size calculator;
10% risk (did this for learning purposes only)
stop loss (pips) 215
currency pair EUR/GBP
Results of position size calculation;
amount at risk £50.06
position size 2328.2326 units
So entered at 0.898350 but less units at 2000 units
stop loss 0.89620
The positional margin required for the position is based on that position’s size: you can slide the stop-loss wherever you like or even cancel it, that won’t change its margin requirement.
But the free margin for the account will move about depending on the gain or loss in the open positions. Free margin is often displayed live and you will see it constantly adjusting with price. This means that the “blocked” portion of the account also moves about with price (I haven’t ever noticed it displayed).
ok understand that bit now - so even if I remove my stop loss, position and free margin still shows the same ( fluctuating slightly with market movement) so how do I know risk value for this trade if i alter a stop loss- Should you go back into a position calculator every time you adjust stop losses?
Also, how would I calculate what leverage is on this example?
Risk is the amount of money in £ that will be lost if your stop-loss is hit. Most people actually derive that number from a percentage of their total account capital - many use 1%. So if they had an account worth £5000, they would only wish to risk £50 on a trade, which is 1% of £5000. So they would set the location of the stop-loss according to the chart and then adjust the size of the position.
The second usage of the word risk is actually a probability - the probability that your stop-loss will be hit. Hopefully this will always be less than 50%, depending on the chart TA.
pip value 0.2 x 21 pips = 4.2
My account says £0.42
how am I miscalculating ?
if you were entered in a trade and adjusted a stop loss and therefore wouldn’t be adjusting position size as you would before entering a trade, I guess you would have to recalculate risk accordingly in this situation ?
On Q1, its not 21 pips, its 2.1 pips. 1 pip on this pair is 0.0001
Where does the 0.2 come from as well?
On Q2, having entered at a certain price and set the stop-loss, and adjusted the trade size, I am never moving the stop further away from the entry, as this would increase capital risk. At this point, as you’re in the trade, its too late to adjust position size.
The profit is the difference between the sell price and buy price, multiplied by the number of units. i.e.
(0.89856 - 0.89835) x 2000 =
0.00021 x 2000 =
0.42 =
£0.42
It won’t change anybody’s life but its a profit. Though worth noting your risk on this was £0.43, so you came in with a r:r of slightly less than 1:1 - you risked 43p and closed for a profit of 42p. Its not against the law but it shouldn’t get to be a regular thing.
Having identified a market to trade, the right direction, an entry point and a stop-loss level, risk is the key missing element.
TA delivers all the first listed criteria, risk is entirely unique to the individual trader. All traders want a risk:reward of at least 1:1. There is little rational support for taking a trade in which you could lose more than you hope to win: the better option would be to remain in cash until the TA shows you the situation has changed.
Risk is the percentage of your account capital you are prepared to lose if your stop-loss is hit. Very few traders make a habit of taking this as high as 5%.