It is imperative to understand that the FOREX TRADING environment is a boundary-less environment and it offers you unlimited access to trading decisions. It is of utmost importance to surround ourselves with some set of rules which could help in guiding our steps in this boundary-less environment we are exposed to as Forex traders. Setting Your LOT SIZE rules while trading tends to protect your Account from getting hurt as it will help you avoid over-trading your account.
Majority in the Forex industry finds it difficult calculating the LOT SIZE that befits their account size before entering a position. From our experience, we discover that this nonchalant attitude is detrimental and has brought a lot of damages to FAT Trading Accounts. It will interest you to know that, No matter how good you are in this industry, poor money management is the riskiest.
Your Money Management Skill (MMS) begins with you understanding the Right LEVERAGE to choose and also knowing the Right LOTS to Trade in accordance with your account size.
STEPS TO CALCULATING THE RIGHT LOTS SIZE
- Consider Your Account Size
- Determine your Stop-Loss (in Pips). Your stop loss in pips should be determined by your analytical strategy
- Determine how many percent you are willing to risk per trade. Do not risk more than 3% of your trading account per trade.
- Determine Value of a pips
- Do this Simple calculations:
CAPITAL = $1,000
RISK (%)= 1% = 0.01
STOP LOSS = 30pips
Value of a Pip = $10 per Pip