Forex Trading Strategies

How To Calculate Position Size Forex Strategies

2015-08-24 | 3518 Print Friendly Version of this pagePrint Get a PDF version of this webpagePDF


 

How To Calculate Position Size Forex Strategies.

If you Know How to calculate position size Forex strategies you will be able to answer some questions related to "How much is a 1 pip movement on EURUSD (or any pair) worth in any currency???"

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It's a question frequently asked by new Forex Traders or not well experienced Forex Traders, knowing how much a 1 pip or 1 point move on a currency is going to make you (or cost you) is one of the most important factors in any forex trade.

If you don't know that, how can you calculate your risk to reward??!!??

Calculating the position size based on the percentage of the risk you want to take and the stop loss size of the trade setup you locate is a pain, specially when you are in rush to enter the market before it becomes too late. You can use a position size calculator, but a calculator that does the job for you right on the trading platform is a much better option. Before sharing such a calculator, please let me explain a little about position size calculation. Why should you calculate your position size before entering the market?

Let’s say you have located a trade setup based on your trading system. That special trade setup needs a 200 pips stop loss. You have a $10,000 account and you want to risk only 2% of your account which is $200. It means if the price hits the stop loss, you should not lose more than $200. Now the question is how big your position size has to be? If you take a one lot EUR/USD position with a 100 pips stop loss, then if it hits the stop loss you will lose $2000 because EUR/USD pip value is about $10, and so 200 pips means $2000. Therefore, if you want not to lose more than $200, then you have to take a 0.4 lots position which is 10 times smaller than one lot. Am I right?

This is how you have to calculate your position size. But the problem is, different currency pairs have different pip values. And to use a position size calculator, you have to enter the currency pair ask price. Besides, it takes time and you can make mistakes when you are in rush to take your positions as soon as possible. And usually you forget how to calculate when you are in rush. So, an automatic tool that does all of this right on the trading platform is really helpful. A tool that calculates the pip value of each currency pair in the background and gives you the result.

Why Positions Size Matters

Position size is a key component in successful forex trading. Risk too much and a few losing trades can wipe out your account. In this case, it doesn’t matter how you enter or exit the trade, because even best traders have losses.

If your position size is too small, then your account won’t grow, and you won’t meet your financial goals. Your performance will be less than what it could be if you were trading with the ideal position size.

Position Size Calculator (MetaTrader indicator) — calculates the position size in lots using given entry/stop-loss levels, risk tolerance and the current market data, such as account size and currency, and the price of the quote currency of the traded pair relatively to the account currency. The result is displayed as a text label in the main or separate chart window. A trader can adjust many parameters, both for calculation and for display. It is an adaptation of our free online tool for traders — Position Size Calculator. The indicator is available for both MT4 and MT5.

If you require more Forex Calculators please click the link to have access to this calculators for – Position Size, Pip Value, Margin, Swap and Profit Calculator


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Instaforex-Africa

Instaforex-Africa is an online forex broker agency that will provide you the technical know hows on how you will succeed in your quest to become successful with your online forex trading. We provide the forex trading platforms and free forex trading tutorials. Call us today on 08133450038 and get our professional agent guide you through the process of setting up a demo account.

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