Being a trader is basically a risk manager. Before you start trading using a real account, then you should be able to calculate the lot size that is right for you, all you need a position size calculator
Calculating position size is important to get a reasonable and comfortable level of risk
But before determining the appropriate lot size position, there is some information that you must collect first.
Here are a few:
- Pairs that traded
- The amount of money on your trading account that you afford to lose (in percentage)
- Stop loss (in pips)
- The price of the pair being traded
Next, how is the application in the form of a case example
We will try to calculate the right lot based on the capital you have and the level of risk that you consider comfortable.
In addition, the lot you use will also depend on whether the currency you deposit is the same as the currency you are trading.
But before we learn more deeply, we will try to understand what pips are, and the lot size
Terms that need to be understood for position size calculator
For beginners, maybe there are those who don’t understand the term about pips or lot size or just remind the traders who might forget this term, it’s good to understand
What are pips?
Pips are the smallest unit of the mention of the value of prices, can also be referred to as a general form of an increase in the value of the foreign exchange.
Example: EUR / USD moves from 1.2250 to 1.2251, that’s 1 pip. Pips are added values of each last decimal number behind a comma.
What is Lot size?
The Forex market is traded in lots size. The standard value per lot is $ 100,000, but there is also a mini lot with a value of $ 10,000 and a micro lot that is even worth $ 1,000, so Lot is contract size to make a transaction in the forex market
For example, assuming: $ 100,000 per lot, then the recalculation to know the effect on the pips value is:
If USD / JPY with an exchange rate of 119.90, hence:
$ 100,000 x (0.01 / 119.80) = $ 8.34 per pips
How to calculate profit/loss?
Now we learn how to calculate Profit and Loss.
Example: Buy US dollars and Sell Swiss Francs. The quoted rate is 1.4525 / 1.4530.
Because we do Open Buy against US Dollars, the value used is 1.4530. Let’s say we buy 1 lot for $ 100,000 at 1.4530.
A few hours later, the price moves to 1.4550 and we decide to close a trade. The new USD / CHF quote rate when closing is 1.4550 / 14555.
Because we closed sell from the previous open buy, the value used is 1.4550. The difference between 1.4530 and 1.4550 is .0020 or 20 pip, so our profit is 20 pips Using the formulation described earlier, hence:
$ 100,000 x (0.0001 / 1.4550) = $ 6.87 per pips x 20 pips = $ 137.40
Forex trading lot size calculator
In forex trading, you really have to consider the size of lots in making transactions
Too high lot size, the risk you face will be even greater.
Conversely, if it is too small then it can mean “wasting” the potential that you have. In essence, you need to know the exact lot size when opening a position.
The forex lot size is closely related to risk management. In a simple context, you might already know that risks in forex trading can be limited by setting a stop loss.
For example, with an initial capital of $ 10,000 you limit the risk by 50%, or equal to $ 5,000 (called risk capital).
That means, the loss you will incur will not be more than $ 5,000
How to calculate lot size forex?
For example, you have $ 10,000 in a trading account
In your trading plan, you set a risk capital of $ 5,000.
Because you don’t want your previous losing trades to repeat itself, you try to set risk of 10% per transaction from risk capital. That means it is $ 500 / transaction.
After observing the market, you see opportunities and trade in the EUR / USD pair.
Based on the technical analysis he did, you see that the risk limit is 200 pips (1 pip = $ 1). That means technically the stop-loss limit is $ 200.
The question is how many lots can you use to open a position?
It’s easy. You just have to share the risk per transaction with the amount of stop-loss that has been obtained based on this analysis.
In this example, the risk per transaction is $ 500 and the stop-loss limit is $ 200. Thus, the maximum lot size that can be opened is:
The risk per transaction is divided by the amount of stop-loss = $ 500 / $ 200 = 2.5 lots
Let’s say you deposit $ 5,000 and intend to trade a EUR / USD pair and put a 200 pips stop loss on every trade that is executed. You also set a target do not want to lose more than 1% of the money from each trade.
From this data, let’s calculate how many lots you should use.
First, let’s find out in advance how much money in USD can be “sacrificed” by multiplying the amount of capital with the target per-trade risk (in percentage).
$ 5000X1% (0.01) = $ 50
Then, we divide the amount of “risk money” with the stop loss value to get the value per pip.
$ 50: 200pips = $ 0.25 per pips
Finally, let’s multiply the value per pip by the known EUR / USD unit/pip value ratio. In this case example, 10,000 units (or one mini lot), each pip has a value of $ 1.
$ 0.25 / pip x [(10,000 units of EUR / USD): ($ 1 / pip)] = 2500 units of EUR / USD
For traders who are accustomed to using lots, with capital, stop loss, and target risks used, then the lot we have to use is 0.025 (or 0.02 if we use the MetaTrader 4 platform).
100,000 units = 1 lot
2500 units = 0.025 (0.02) lots
How to trading on an Indirect Currency Pair?
Indirect currency pairs are currency pairs whose counter currency is not USD. Examples are USD / JPY, USD / CHF, and USD / CAD.
The value per pip for the currency pair is not $ 1. For example for USD / JPY: the value per pip is 100 JPY (to quote with 3 decimal places).
Well, to be able to enter this value into a calculation like the one above, you need to convert into USD.
For example, you make a transaction Sell USD / JPY at 120,000. then found that technically the stop loss was at the level of 120,500, which is 500 pips.
We already know that for USD / JPY, 1 pip = 100 JPY. This means the stop loss rate this time is 50,000 JPY. How much in USD?
When the price touches the stop loss level (120,500), then 50,000 JPY will be worth approximately $ 414.94. How to calculate it like this:
The stop-loss amount is divided into the stop loss price level = $ 50,000 / 120.5 = 419.94
Thus, the number of lots that allowed to open for transactions in USD / JPY is:
The risk per transaction is divided by the amount of stop-loss = $ 500 / $ 419.94 = 1.2 lot
However, this calculation does not include the amount of swap or commission if any
Indicator position size calculator
Maybe for those of you traders who are reluctant to make position size calculations, either because they still do not understand correctly how to calculate it, then you can use the position size calculation indicator
With this indicator will automatically calculate the position size in the lot with the current pair price can determine/calculate the automatic stop loss level (risk tolerance) and profit targets.
Such as balance size and currency, and quote currency prices from the pair traded relative to account currency.
The results are displayed as text labels in the main chart window.
So using this indicator will help traders determine the lot size to adjust the amount of capital they have in a trading account
But this indicator is not a confirmation signal indicator, only it will help you to manage risk in accordance with money management
This will be very useful in your trade towards professional traders
Position size calculator free download
The indicator is not for order signals, but it has the purpose of helping Forex traders calculate position sizes for the size of the risk that is allowed and certain position parameters, so you don’t need to calculate the manual which takes longer
You can set parameter values by selecting edit indicator
How to Install
After you download the indicator if the file is still in zip format, you need to extract the file, for mt4 it might have the .mq4 file format
First, run your mt4 trading platform, then select open data folder on the file menu in the top right corner of your platform
There you will find the MQL4 folder, you open the folder and look for the “indicator” folder, then copy paste the indicator file in the folder
To display indicators on your platform, you can close the platform first and then run again
Or a faster way by pointing the cursor to the navigator window then right click and looking for the refresh option, then the new indicator will appear in that window, you will find it and double click to attach to your platform
Forex lot size calculator website
In addition to using indicators, you can also use the forex lot size calculator service on several websites that provide this tool
Indeed, each of them uses a different calculation method, but you can choose and sort which one is the best and best for you to apply
Here some list website forex lot size calculator
- Babypips position size calculator
- Myfxbook forex calculator
- Earnforex position size calculator
- Forex21 forex risk calculator in lots
- 2ndkiesforex position size calculator
As a trader, it is appropriate to conduct transactions by applying the right money management, because forex trading is not only about profit but also risk
The forex trader is a risk manager who must consider every transaction made so as to provide more opportunities when one plan trading fails
If he is able to manually calculate position size, this is also good because he understands the calculation of position size measurement in more detail
But for traders who want an instant method, they can take advantage of position size calculation indicators, or visit a website that provides forex lot size calculator services
Final words, hope you are successful and to apply everything you have learned, TenkoFX brokers are brokers who provide the best service for forex traders, you will find positive reviews about this broker by traders