swing trading<\/a> system that trades EUR\/USD and that he risks about 200 pips per trade.<\/p>\n\n\n\nEver since he blew out his first account, he has now sworn that he doesn\u2019t want to risk more than 1% of his account per trade.<\/p>\n\n\n\n
Let\u2019s figure how big his position size needs to be to stay within his risk comfort zone.<\/p>\n\n\n\n
Using his account balance and the percentage amount he wants to risk, we can calculate the dollar amount risked.<\/p>\n\n\n\n
USD 5,000 x 1% (or 0.01) = USD 50<\/p>\n\n\n\n
Next, we divide the amount risked by the stop to find the value per pip.<\/p>\n\n\n\n
(USD 50)\/(200 pips) = USD 0.25\/pip<\/p>\n\n\n\n
Lastly, we multiply the value per pip by a known unit\/pip value ratio of EUR\/USD. In this case, with 10k units (or one mini lot), each pip move is worth USD 1.<\/p>\n\n\n\n
USD 0.25 per pip * [(10k units of EUR\/USD)\/(USD 1 per pip)] = 2,500 units of EUR\/USD<\/p>\n\n\n\n
So, Newbie Ned should put on 2,500 units of EUR\/USD or less to stay within his risk comfort level with his current trade setup. Otherwise, he\u2019d be regressing back to his previous gambling self.<\/p>\n\n\n\n
Pretty simple eh?<\/p>\n\n\n\n
But what if your account is the same as the base currency?<\/p>\n\n\n\n
If your account denomination is the same as the base currency\u2026<\/h2>\n\n\n\n
Let\u2019s say Ned is now chilling in the eurozone, decides to trade forex with a local broker, and deposits EUR 5,000.<\/p>\n\n\n\n
Using the same trade example as before (trading EUR\/USD with a 200 pip stop) what would his position size be if he only risked 1% of his account?<\/p>\n\n\n\n
EUR 5,000 * 1% (or 0.01) = EUR 50<\/p>\n\n\n\n
Now we have to convert this to USD because the value of a currency pair is calculated by the counter currency. Let\u2019s say the current exchange rate for 1 EUR is $1.5000 (EUR\/USD = 1.5000).<\/p>\n\n\n\n
All we have to do to find the value in USD is invert the current exchange rate for EUR\/USD and multiply by the amount of euros we wish to risk.<\/p>\n\n\n\n
(USD 1.5000\/EUR 1.0000) * EUR 50 = approx. USD 75.00<\/p>\n\n\n\n
Next, divide your risk in USD by your stop loss in pips:<\/p>\n\n\n\n
(USD 75.00)\/(200 pips) = $0.375 a pip move.<\/p>\n\n\n\n
This gives Ned the \u201cvalue per pip\u201d move with a 200 pip stop to stay within his risk comfort level.<\/p>\n\n\n\n
Finally, multiply the value per pip move by the known unit-to-pip value ratio:<\/p>\n\n\n\n
(USD 0.375 per pip) * [(10k units of EUR\/USD)\/(USD1 per pip)] = 3,750 units of EUR\/USD<\/p>\n\n\n\n
So, to risk EUR 50 or less on a 200 pip stop on EUR\/USD, Ned\u2019s position size can be no bigger than 3,750 units.<\/p>\n\n\n\n
Still pretty simple, eh?<\/p>\n\n\n\n
Well, now it gets slightly more complicated.<\/p>\n\n\n\n
Don\u2019t worry though. We got yo back and we\u2019ll explain everything so it\u2019ll become as easy as baking a cake.<\/p>\n","protected":false},"excerpt":{"rendered":"
To make things easier for you to understand, as usual, we\u2019ll be explaining everything with an example. This is Newbie Ned. A long time ago, back when he was even more of a newbie than he is now, he blew out his account because he put on some enormous positions. It was as if he was a gun-slinging cowboy from the Midwest \u2013 he traded from the hip and traded BIG. Ned didn\u2019t fully understand the importance of position sizing and his account paid dearly for it. He re-enrolled into the School of Pipsology to make sure that he understands it fully this time, and to make sure what happened […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[91,88],"tags":[],"class_list":["post-4353","post","type-post","status-publish","format-standard","hentry","category-position-sizing","category-undergraduate-senior"],"_links":{"self":[{"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/posts\/4353","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/comments?post=4353"}],"version-history":[{"count":1,"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/posts\/4353\/revisions"}],"predecessor-version":[{"id":4354,"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/posts\/4353\/revisions\/4354"}],"wp:attachment":[{"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/media?parent=4353"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/categories?post=4353"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/apex-aiexperts.com\/ja\/wp-json\/wp\/v2\/tags?post=4353"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
![\"Calculating](\"https:\/\/bpcdn.co\/images\/2016\/05\/senior-newbie-ned.jpg\" "\\"Calculating")
<\/figure>\n\n\n\n