How much to buy w/2% risk of $1k and w/50pip SL?

[kenazen]

Originally Posted by MickMason

lol, don't you believe it

Work out the value of a pip for other pairs and use the same formula, it might be easier to stick to Gbp/Usd and Eur/Usd for now though.


Mick

I was lying there trying to go to sleep, when I realized that spending 1/100th of my money was not the same as limiting my risk to 1/100th of my money. So I will look at the math again after I sleep a few hours.

[kenazen]

There are 3 scenarios I am going to have to figure out, NonUSD/USD, USD/NonUSD, and NonUSD/NonUSD. I will start with NonUSD/USD first, in hopes it is the simplest. In this example, I try to figure out how much of my money to spend on the EUR/USD, assuming I have no other investments. I am deliberately trying to remove the "50" that was in the previous examples, since I was never sure when it was a "50 pip SL" or "50:1 Leverage".


Account Size: $2,000.00 (USD)
Core Equity: $2,000.00 (USD)
Pair: EUR/USD @ 1.1855/60
Stop Loss: 30 pips per Unit
Leverage: 20:1
Willing to Lose: 2% of Core Equity
Base is in USD ("EUR/USD")

------------------------------------------------

1) Determine USD amount willing to lose:

2% of $2,000.00 is $40
$40 is the amount I'm willing to lose


2) Determine Units to Buy:
Divide max loss by max pips-per-unit-loss

$40 / 0.0030 = 13,333 units

3) Determine un-leveraged units:

13,333 / 20 = 666 units

4) Determine cost of units:

666 * 1.1855 = $789.54 (USD)


So in my account of $2,000.00 - I would buy $789.54 USD worth of EUR/USD ?

[ampris2000]

download the spreadsheet around the end of this thread
http://www.moneytec.com/forums/showthread.php?t=17895

[kenazen]

Originally Posted by ampris2000

download the spreadsheet around the end of this thread
http://www.moneytec.com/forums/showthread.php?t=17895

Ok, I will download it and get OpenOffice.

thanks!

[MickMason]

Originally Posted by kenazen

1) Determine USD amount willing to lose:

2% of $2,000.00 is $40
$40 is the amount I'm willing to lose


2) Determine Units to Buy:
Divide max loss by max pips-per-unit-loss

$40 / 0.0030 = 13,333 units

3) Determine un-leveraged units:

13,333 / 20 = 666 units

4) Determine cost of units:

666 * 1.1855 = $789.54 (USD)


So in my account of $2,000.00 - I would buy $789.54 USD worth of EUR/USD ?

Strewth, that's a lot of numbers!

Risking $40 with a stop of 30pips means a trade of 13k ($40 divided by 30pips = $1.33 per pip)


Mick

[kenazen]

Originally Posted by MickMason

Strewth, that's a lot of numbers!

Risking $40 with a stop of 30pips means a trade of 13k ($40 divided by 30pips = $1.33 per pip)


Mick

My first example was an "easy" nonUSD/USD one. If it is correct, then I will next post a USD/nonUSD example (like USD/JPY). The trickiest would be a nonUSD/nonUSD example, like CHF/JPY. I am assuming the formulas are different for each.

[kenazen]

Originally Posted by ampris2000

download the spreadsheet around the end of this thread
http://www.moneytec.com/forums/showthread.php?t=17895

Is this spread sheet only for the EUR/USD pair? How do you handle non-USD currency pairs?

[ampris2000]

i don't know if your broker shows it , but mine shows me the pip value as i am entering the units to trade. so even though you may be doing different pairs, as long as you have the right pip value it doesn't matter