Trading with the proper position size on each trade is key to successful forex trading. Position size is how many lots (micro, mini or standard) you take on a particular trade. The ideal position size is based on both account size, the setup of each trade, and the pair being traded.
Trade size is an important aspect of every trading plan. Traders quickly forget this to their own peril. Many traders are not reaching their trading goals because their trade size was too large for their account equity which leads to reluctance of letting go of losing trades.
When trade size gets out of hand and too large, all the analysis in the world is worthless. The risk can quickly outweigh the benefits. Because of this, having a formula to manage your risk is of extreme value for your trading career. If you’re not a math major, no worries at all. A simple formula is provided at the end of the article for you apply moving forward.
The general rule of thumb, however, is to not risk more than 5% of your account size per trade. Learn how to boost profit when investing in Forex while keeping risks at a minimum.
0.01 lot size in forex or micro lot equals 1.000 units of any given currency. Position size of 0.01 lot for EURUSD currency pair, for every 10 pips gain will provide a $1 profit (10 cents per pip). So for EURUSD means that 10 pips for 0.01 lot size profit are $1.
Therefore, for a position of this size – 10,000 units – we will gain or lose $1 for every pip movement in either direction. So if the EUR/USD moves 100 pips (i.e. 1 cent) in our direction we will make $100 profit. We can do this for any trade size. The calculation is simply the trade size times 0.0001 (1 pip).
- Lectures 10
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- Duration 69 hours
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- Language English
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Understanding Trading Volume And Sizes