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Chapter 33, Part II. Position Size Calculation. Page 3

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

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Commander in Pips: So, let’s pass to the task where we might have to use cross-currency rates…

    TASK#3. Your account denominated in EUR, but you intend to trade USD/CHF. All other parameters are the same. Assume that the current EUR/USD rate is 1.3480 and the current USD/CHF is 0.9165


    Pipruit: Since our fiscal result will be formed in CHF, we need to somehow express our limit loss in CHF…

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

    2. Now we need to calculate the EUR/CHF rate = 1.3480/0.9165 = 1.2354

    3. Hence, my maximum loss in CHF will be: 150EUR x 1.2354 ~ 185 CHF (counter currency)

    4. Based on stop-loss order in pips, our lot should be equal to: 185/0.028= 6607.14​

    Commander in Pips:
    Well done!


    Commander in Pips:
    And finally is the task with the JPY. Although this is almost the same as task#2, but many people have problems with JPY, since the is quoted for 100Y but not for 1 Y.

    TASK#4. Your account denominated in CHF, but you intend to trade CHF/JPY. All other parameters are the same. Current CHF/JPY rate is 85.05.


    Pipruit: Hm, let’s see:

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

    2. Or 150 CHF x 85.05 ~ 12,758 Y in counter currency (Yen)

    3. Based on stop-loss order in pips, our lot should be equal to: 12,758/(0.028*100) = 4556.43 JPY


    Commander in Pips: Nice job, you have done well. So, this part now is also familiar to you.

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.



    Note: FPA ranks are earned in the battles against scam, not in the classroom.
     
    #1 Sive Morten, Dec 28, 2013
    Lasted edited by : Oct 9, 2016
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