Trading Lot size for 1:200 Leverage

Beginner Questions
1

Hi there,

I am using a 1:200 Leverage by default for a standard account and wondering how much lot size can i set for $500 trade amount? is it .01 or .05? as I am using an EA for the MT4 platform. Thanks for your help

1 Like
2

I don’t trade with robots, but it really depends on your own system. Sorry to tell you but you have to figure out how you want to trade.

Animals in a herd get culled, the wandering shepherd leads the pack. In normal speak, don’t go with a crowd, figure out what works for you. I am not sure if you know this but here is a link Position Size Calculator - BabyPips.com, use this :slight_smile: :wink:

3

I think you have to figure out what risk percentage works for you. I have always known it is best to risk less than 2% on each trade. So calculate using the calculate given above or find the margin required calculator to find out how much you will be using on a trade with that leverage.

4

To determine position size you have to ask yourself a question: What’s my preference/ability to take risk? In quantitative terms this question would be equal to: how much money / % of equity I can afford to lose per trade?

For example you are an aggressive trader and can afford to lose 5% of equity per trade. Let’s imagine your current equity is $1000, so 5% is 50 USD. When your equity drops, 5% will be lower than 50 USD, or bigger than 50 USD (if equity rises). This maintains flexibility of risk since it’s a function of equity (not some fixed amount like 10 USD per trade).

The next step is to determine the distance of price movement (in pips) that would constitute a loss of 50 USD?

For instance, with help of some analysis you determined that you have to place stop loss at the distance of 50 pips. Then pip value (central concept in risk management) would be equal to 50 USD/ 50 pips = 1 USD. Recall that pip value for one lot equals to 10 units of quote currency. For example it is 10 USD for 1 lot of EURUSD. Since we determined that pip value equals 1 USD, then your lot size should be equal to 0.1 lot.

Hope it helps.

5

May I know the instruments you want to trade in?