Formula for risking X percentage on a position...
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Thread: Formula for risking X percentage on a position...

  1. #1
    Hey ,

    That is my very first post in this forum. I wish I knew enough about what I was doing in order that my very first post was not in the kind of a quesiton, but it's what it is.

    I'm new to Forex in that I have not gone yet. I have taken one FX online course that I believe now to have been a complete waste of cash. I have read Forex Made Easy by Dicks and'm in the process of reading Trend Following.

    All this, and that I haven't discovered a formula to the following:

    I want to risk X% (1,3,5,10) on a place. If every pip is worth Y (8-10, 1 on a mini) dollars, my risk reward is 1:2, but my trading range will be a stop at -10 pips and a limit at 20 for example, what leverage needs to be used and how many lots?

    It looks like there ought to be a simple equation for this, but it seems evident I simply don't have the understanding of the workings of lots and leverage.

    All help would be extremely well appreciated.

  2. #2
    I have an excel file that is exactly what you need

    Send me a private message with an email address you'd like it delivered to and I'll fire it off to you.

    .

  3. #3
    Quote Originally Posted by ;
    Hey ,

    That is my very first post in this forum. I wish I knew enough about what I was doing this that my very first post wasn't in the shape of a quesiton, but it's what it is.

    I'm new to Forex in that I haven't gone yet. I have taken one FX online course which I believe now to have been a complete waste of cash. I have read Forex Made Easy by Dicks and'm in the process of reading Trend Following.

    All this, and I haven't discovered a formula to these:

    I want to risk X percent (1,3,5,10) on a position. If every pip is worth Y (8-10, 1 on a mini) dollars, my risk reward is 1:2, but my trading range is a stop in -10 pips plus a limitation at 20 for example, what leverage needs to be used and how many lots?

    It looks like there should be an easy equation for this, but it seems evident I just don't have the comprehension of the workings of lots and leverage.

    All help are extremely well appreciated.
    This goes,

    Total Capital = C
    Risk per place as percentage of funds X (As you mentioned)
    Risk/Reward: 1:2
    Risk/Reward Range: 10/20 pips
    Pip Value: Y (As you mentioned)

    So basically, you're inclined to risk only 10 pips on each position, not exceed the X percent in the exact same time...

    Hence:

    XC = 10Y

    Your Capital (C) must be known, your risk percentage has to be known (X, how much percent are you willing to risk out of your capital for the circumstance ), and you'll be able to get the pip value from the equation (Y)...

    Once you get Y, you have the lot size that you're going to start the place in....

    If Y=1, lot dimensions = $10k or 1 mini
    If Y=5, lot dimensions = $50k or 5 mini
    If Y=9.7 lot dimensions = $90k or 9 minis

    Or at brief, Lot size = $10,000 x Y

    And so on...


    For example, if your capital is $22,000, then you are willing to risk only 2.5% of your funds on any single transaction, then the pip value should be:

    2.5/100 x $22,000 = $550 = 10Y -- Y=$55

    For Y (Pip worth ) to be $55, lot dimensions must be $10,000 x $55 = $550,000 or 55 miniature lots or 5 typical lots 5 miniature lots (Whatever you like to call them )


    Thanks,

    Nader

  4. #4
    Awesome, exactly what I was looking for. Thanks a million.

  5. #5
    Quote Originally Posted by ;
    Awesome, exactly what I was looking for. Thanks a million.
    Anytime


    Thanks,

    Nader

  6. #6
    Might as well get them out of the way today...

    Occasions. I understand scalping is not a highly practised method in the FX market, at least by many who are successful. Still, to the untrained eye, my very own, there seems to be a point hours before the an event launch where there's a breakout. Could you just jump onto the bandwagon with a trailing stop, with little risk involved?

    Additionally, a method I've been tossing around, I call it wholeheartedly, I have seen it called pyramid. If on longer term transactions your position travels the anticipated way, how realistic is it to add more to your position at specified periods, in hopes of exponetially raising profits?

    Okay, I am done for the time being.

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