Learn how professional traders use the Forex position size calculator to implement sound risk management strategies. How to calculate position size Forex is critical to accurately manage your risk. In this guide, we’re going to show you how to use our proprietary Forex position size calculator so you can work out your trading position sizes whenever you need to.
You can find the calculator by heading over to the Forex position size calculator download link HERE.
Your position size should always be based on your risk tolerance. However, you still need to learn what is the maximum size position I should take in Forex trading to remain profitable. The 2% rule is the standard in the hedge fund industry.
The 2% rule is an effective way to control risk that establishes you should only risk 2% of the value of the account on any particular trade idea.
So, what is the position size in Forex trading?
Position sizing is part of any successful risk management strategy.
Position sizing tells you how much you should risk each time you execute a trade. It’s the amount of risk that you’re willing to take depending on the amount of pips that are being risked in the open market. Basically, position sizing takes into account three components:
- Account size.
- How much risk or % of your account you’re willing to risk on each trade. That is a personal decision in terms of what your comfort level is and how aggressive your trading is. Everybody has their own level of comfort in terms of what their risk tolerance is, however, most professional traders will not risk more than 1% or 2% of their account balance.
- Stop Loss. If you don’t have a stop in place to limit your theoretical maximum loss, then the damage can potentially destroy your account and in some unforeseeable situation possible puts you in a position where you owe money to your broker.
This is just a basic model to give you some fundamental understanding, but you must use position sizing with your money management to ensure your consistency in terms of your losses, but also in controlling your account balance from being damaged.
Moving forward, we’re going to outline how to use the Forex trade position size calculator.
Forex Position Size Calculator
Once you have found the calculator on our Forex position size calculator download page it will ask you for several pieces of information. The Forex position size calculator formula requires these inputs in order to calculate how much you should risk any particular trade.
Our proprietary Forex position size calculator App requires the following inputs:
- Choose the currency of the account that you are trading from.
- Select the currency pair that will be traded.
- The current size of your trading account. Enter the balance of your account rounded to the nearest whole number; entering decimals will get an error.
- The percentage of the account you want to risk on the trade. You don’t have to enter a percentage sign or anything. Literally, just write the number to represent the percentage you want to risk. Enter the percentage of risk in your account that you are comfortable taking. (1-2% is commonly suggested as a comfortable level of risk that will prevent blowing up your account.)
- And finally, enter the size of your stop loss in pips. (This is the amount of buffer you allow in the price movement of the pair you are currently trading).
The position size you need to trade at to risk the correct amount of money will then appear under a pop-up window. Hit calculate to see your results.
When opening your current trade, simply enter the number of lot size indicated by the Forex position size calculator formula. This way you will be trading within your risk parameters.
For further instructions on how to use the Forex position size calculator download page simply hit the instruction button.
Forex Position Size Calculator Formula
If you want to trade within your risk parameters simply use the following position sizing formula:
Position size in lots= $ at Risk/ (Stop-Loss in pips x Pip Value)
This represents one of the easiest formulas that everyone can remember. However, we’re going to present with other ways on how to calculate position size forex. This way your knowledge on Forex size position mt4 will be complete.
The dollar amount at risk simply represents how much of your account balance you want to risk on each trade. Do you want to risk 2%, 5% or maybe 10% of your account? It’s up to you, but as we stated in the beginning, implementing sound risk management requires risking no more than 1% or 2%.
$ at Risk = % Risk x Account Balance
The stop loss is determined individually based on several factors like your exit strategy or technical reading skills.
“Pip value” is a known variable. For example, each EUR/USD pip movement is worth $1 when trading a mini lot. However, if you’re a math geek you can divide the amount risked by the stop loss to find the pip value.
Smart position sizing can immediately turn you from a losing trader into a low-risk and high-return trader. The position sizing concept is designed to help you achieve your financial goals whether that is:
- To maximize your chances of achieving your goal of X% return.
- To minimize and reduce your chances of having a drawdown as big as Y%.
- Or some combination of both.
Implementing wise position sizing in the long-term will yield more stable account growth.
How to Calculate Position Size Forex
How do I calculate position size in Forex?
That’s the next important question we’re going to answer. For this purpose, we’re going to assume a real situation that every trade is faced before opening a trade.
As an example, we’ll use a hypothetical account size of $10,000 and use a maximum exposure of 2% on any one trade. Our risk exposure level in this particular case would be $200.
2% * $10,000 = 2/100 * $10,000 = $200 (Risk/Trade)
We’re taking a trade based on our account size and on a 2% risk and that maximum risk that we’re going to put our technical stop-loss in the market it would be $200. The third component that we need to take into consideration to determine our position size is our stop loss. For simplicity, our maximum stop-loss is 50 pips. To find the value per pip we divide the amount risked by the stop loss.
Value per pip = $200 / 50 pips = $4/pip
Last but not least, we have to use the following Forex position size calculator formula:
Position size = Value per pip * [(10k units of EUR/USD) / (USD 1 per pip)]
Now you have all the details you need to calculate the position size for your trades. Applying the above position size formula for our hypothetical example will result that you need to put 40,000 units of EUR/USD or 4 mini lots to stay within the initial risk parameters.
Conclusion – Forex Position Size Calculator Download
Aside from your own psychology, how to calculate position size forex is the most important topic that you could ever learn. Trading the Forex market without a Forex position size calculator can be like riding a roller coaster. If you don’t know how do I calculate position size in Forex, it’s unlikely you’ll ever succeed in the market.
The Forex position size calculator formula is another component of the money management strategy.
Now that you've learned the basics of Forex position size calculator app you can be in control of your risk parameters and why not, you can have a better night's sleep knowing that your account won’t blow out overnight. If you’re not that good at math, that’s not an issue anymore because we provide you with the best Forex position size calculator leverage, which will transform any retail trader into a reputable risk manager.
Also, be sure to check out our Forex Power Indicator Tool.
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