How to Easily Calculate Your Position
#437: How to Easily Calculate Your Position
In this video: u9s2tw5e
00:23 – Most traders do not understand lot/position sizing
00:45 – The way most people trade
01:43 – Each pair pays a different amount per pip
02:36 – I’ve made it easy and quick for you
03:00 – How the heart and the mind affect your trading
05:15 – High reward:risk trading strategy
06:40 – Download the calculator today
06:57 – Are you looking for a good Forex broker?
What lot size or position size should you take on all of your trades? Let’s talk about that and more right now.
Hey traders, it’s Andrew Mitchem here at The Forex Trading Coach with video and podcast number 437.
Most traders do not understand lot/position sizing
Now unfortunately most traders out there do not understand the importance of position sizing or lot sizing. They don’t understand the importance, they don’t understand how to do it, and they don’t really understand why they should do it. But if you don’t understand that, it’s going to make a huge negative effect on your trading. And let me explain what I mean.
The way most people trade
You see, most people focus on making pips and they really don’t understand the importance of low risk controlled trading. And someone would generally place a trade, it doesn’t matter what the currency pair, what the timeframe chart, what the size of the stop-loss is, it doesn’t matter what their own currency account is. They’ll just place a trade at one standard lot per trade, or 0.1 or 0.01 depending on the size of your account. But they’ll just go and place the same lot size on every trade. In fact, most people will just go and place the same stop-loss on every trade regardless of the trade or the market conditions or anything. And when you think about that it’s just utter madness. Why would you do any of those? But that is probably what 90% of all traders out there are likely going to be doing.
Now if you’re listening to this thinking, “Yeah that’s what I do.” Then you really need to listen to this next bit because it’s highly important.
Each pair pays a different amount per pip
You see the issue with the Forex pairs is that each currency pair has a different payout per pip. It depends on what the currency is. It also depends on what your account denomination is. So if you’ve got a US Dollar account, then your payout per pip, let’s say the Euro/US Dollar, will be different to my account that may be in New Zealand Dollars, or someone else’s account that may be in Euros or Pounds or Canadian Dollars. It’s all different. So you really need to understand that.
Now the problem is, for most people that’s just too difficult to work out. It’s like this sort of big calculation that you need to figure out. So most people don’t do that. They’ll just go, oh I’m just going to put 0.1 lots on this trade. And the next trade? I’m just going to put 0.1 lots on the trade. That’s the problem.
I’ve made it easy and quick for you
Now I’ve made it very easy for you. I have a free lot size calculator that works on MT4 and MT5. Just select the right one, by the way, when you download it. It’s freely available on my website. I’ll put a link to it on this video and podcast post so you can find it. If you don’t have it, definitely download it. It is invaluable and you should be using it on all your trades.
How the heart and the mind affect your trading
Now, what you have to think about is this: when you have variable losses, it starts to play with your emotions. The two things in trading that affect you, one’s your head and one’s your heart. You have to control your emotions. Now, the way I trade is I have a maximum risk of half of 1% of my account per trade. So what that means is this: let’s say I had a $10,000.00 account, it could be $10,000.00 or £10,000.00 it doesn’t matter. 10,000.00 something in my account. If I’m risking half of 1%, that means I’m risking $50.00 per trade, or £50.00 per trade. 50 per trade. So half of 1% of $10,000.00 is $50.00.
So that means I know when I take a trade, regardless of the currency pair I’m trading, it could be the Euro/US Dollar, it could be the Australian/New Zealand Dollar, it could be on Bitcoin, it could be on copper, it could be on gold, it could be on the Canadian/Yen, it doesn’t matter. Whatever I’m trading, it doesn’t matter what the stop-loss size is, the currency I’m trading, or the timeframe chart. I know that the most I will lose if my trade were to go wrong is $50.00, or half of 1% of my $10,000.00 account.
Now when you think about that, when you have losses… And let’s face it, everyone will have losses. I have losses, our clients have losses. Everybody will have losses, okay? What you want to do is make sure that your losses are controlled and a known amount and consistent. It’s no good on a $10,000.00 account taking a $500.00 loss and a $100.00 loss and a $5.00 loss and a $300.00 loss. It’s just all over the place. You cannot have trading like that. You have to have controlled, known stop-loss and risk per trade before you even take the position.
Now to get that, what you have to do is adjust your lot size, and that’s where our calculator comes in. Saves you doing all the working out and the numbers and the calculating. It tells you the exact position size or lot size you need to place on that trade. And so that’s the beauty of it.
High reward:risk trading strategy
Now, if you can have like we do a strategy that has high reward to risk trades, in other words you might be making two times your risk, three, four, sometimes we have five times our risk. It means that for your $50.00 loss, if your trade’s profitable you might be making $100.00, $150.00, $200.00, or even $250.00 gain for your risk of $50.00. And that’s how you will make money consistently and long term in trading. Your losses are small, little, controlled losses. Your gains are big.
So you basically step; a few little losses, a few big gains. Make a massive move. A loss, a big gain. Couple of losses, another gain. And that’s how you’re going to make your growth of your account while controlling your emotions in your trading. Because if you can control your emotions, you can control your strategy and the way that you trade. You’re not just interfering and fiddling with a trade because you see it’s a little bit of profit, I’m going to close it. Why do people do that? Why do people always close for a small amount of profit when there’s no need to? But they take the full loss? That becomes the issue. So you’ve got to flip that around. If you can do that, you can do that with low risk and you can do that by adjusting your position size or your lot size to ensure that all your trades are known, controlled, and low.
Download the calculator today
Download the calculator if you have not done so. It is going to be a massive step forward for your trading and to help you, 1) with the ease of it, and 2) with the calculation and the control. This is Andrew Mitchem here at The Forex Trading Coach. Hope that helps.
Are you looking for a good Forex broker?
Lastly, I need to mention about brokers. I get asked about it all the time. If you are after a high quality, really really top service in terms of customer service, reliability, ease of getting your money back out as well, Blueberry Markets over in Australia. Have a look at Blueberry; I’ll put a link to them as well on this video and podcast. There’s also a link on my website. Go and check them out if you’re looking for a really good option to consider a safe place to put your funds, and a really good quality broker to deal with. Blueberry Markets in Australia. Have a look at the link. I can highly recommend them. I’ve been with them myself for years, and we’ve sent thousands of people to them. They are all very pleased with Blueberry. So I’ll see you this time next week for more trading tips and information. This is Andrew Mitchem here at The Forex Trading Coach. Bye for now.
Episode Title: #437: How to Easily Calculate Your Position