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Calculating Your Position Size

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76 views2 pages

Calculating Your Position Size

Uploaded by

adams.radiy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Calculating Your Position Size

Fixed Fractional Money Management is a quicker method for managing your position
size as your account grows or reduces
We know that Position Size is dependent upon:
Stop Loss Size
Amount of Trading Capital
% Risk per Trade
Number of Positions per Trade
Assume Trading Capital = $10,000
1% = $100 = Max Risk on any one trade.
To get the most potential out of a trade you need multiple positions
Assume take 3 positions on any one Trade (T1; T2; T3+)
Assume average Stop Loss = 33 pips.
1 mini-Lot = 0.1 of a Standard Lot = $1 a pip
If we then take 3 mini-Lots for each trade we take. (3 x 0.1 lot)
3 x 33 x $1 a pip = $99 of Risk = just under 1% of our Trading Capital
If our Stop Loss size doubles to say 66 pips then our position size must halve from
$1 to 50 cents a pip = 0.05 of a lot = 5 micro-Lots.
If our Stop Loss is smaller at say 16 pips then our position size can be twice the
normal size at $2 a pip = 0.2 of a Lot or 2 mini-Lots.
So for a standard or average Stop Loss of 33 pips say, we can quickly work out our
position size.
For every $1000 your account increase or decreases then we can use the thumb
rule of adjusting our position size by 0.01 of a lot (1 micro-Lot = 10 cents a pip)
So if my account has $10,000 in it, then each position size for my average stop = 0.1
of a lot or 1 mini-Lot
Provided my Stop Loss is around 33 pips and for 3 Positions per Trade:
If my account grows to $11,000 then my position size increases to 0.11 of a Lot.
If my account grows to $15,000 then my position size can rise to 0.15 of a Lot.
If my account decreases from $10,000 to $9,000 then I reduce my position size to
0.09 of a Lot and so on…
I have found this to be the quickest and easiest way to manage position sizes
incrementally based upon my Trading Capital whilst only risking about 1% on any
trade at any time.
Provided my Stop Loss is around 33 pips and for 3 Positions per Trade:
Trading Capital Position Size
$5,000 0.05
$8,000 0.08
$10,000 0.10
$11,000 0.11
$12,000 0.12

But what do we do if our Stop Loss is either bigger or smaller than 33 pips?!

Thankfully, there is a simple and easy calculation we can use to calculate our
position size with a variable stop loss:

New Position Size = (33 / New Stop Loss Size (pips)) x Normal Position Size

E.g. For a $10,000 account, Risking 1% on any trade with 3 positions per trade we
know that our position size is 0.1 ($1 a pip) for a standard stop loss of 33 pips.

If our stop loss now has to increase to 66 pips then we can calculate the new
position size:

New Position Size = (33/66) x 0.1 = 0.05 of a lot or 5 micro-lots (50 cents a pip)

Or you can use this calculator at the link, just remember to put the number of
positions in the box labelled “Trade Size (Lots)”, e.g 3:

http://www.myfxbook.com/forex-calculators/position-size

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