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# Chapter 33, Part II. Position Size Calculation. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 28, 2013.

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1. ### Sive Morten Special Consultant to the FPA

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Let’s say that our assets value is 10,000 USD, our maximum loss in every trade is 1.5% of total assets and our average stop-loss order is 280 pips as we’ve said based on daily volatility. Later you will be able to use any parameters – the overall framework will be the same. So, here is the first task:

TASK#1 is simplest 1. Let’s suppose that your account denominated in the counter currency of the pair that you intend to trade, say, EUR/USD. Estimate dollar maximum risk value and lot size.

Pipruit: Ok, that doesn't looks too hard:

1. Our money amount of risk in each trade is equal to 10,000*1.5% = 150 USD.

2. Based on stop-loss order in pips, our lot should be equal to: 150/0.028= 5357.14 USD or ~0.05 standard lot.

Commander in Pips: Yes, that’s it.

Commander in Pips:
Let’s make the task a bit harder. What if your account currency is the same as base currency? Relatively to our example, what if your account was EUR denominated?

TASK#2. Let’s suppose that your account denominated in the base currency of the pair that you intend to trade, say, EUR/USD. Estimate the dollar maximum risk value and lot size.

Pipruit: Well, then my risk will be 150 EUR instead of USD and depending on EUR/USD rate I might have either greater lot (if EUR/USD>1 or smaller one, if EUR/USD <1). By the way, what is the EUR/USD rate?​

Commander in Pips: Let’s say the EUR/USD = 1.3480 when you are planning your trade.

Pipruit: Ok, then:

1. Our money amount of risk in each trade is equal to 10,000EUR *1.5% = 150 EUR.

2. Or 150EUR x 1.3480 ~ 202 in counter currency (USD)

3. Based on stop-loss order in pips, our lot should be equal to: 202/0.028= 7214.28 USD or ~0.07 standard lot.
Commander in Pips: Excellent!

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Lasted edited by : Oct 9, 2016
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