How To Determine Lot (volume) Of Trading?

Hi Chris Kyle,
The size of the lot (volume) in trading is not determined by leverage but by the amount of capital. The bigger your capital, the higher the trading lot you can use. Before determining the lot size, you must know the resistance of your funds against the currency pair that you want to trade. For example:

your capital is USD1,000. So in my opinion in order to trade properly, you must be able to hold approximately 1000 pips (excluding margin). To hold those 1000 pips, you have to trade with a pip value = USD1,000/1000 pips = USD 1 per pip. In this case, you have to trade on a mini or mini lot account or 0.1 lot, for the pair XXX / USD (EUR / USD. GBP / USD, AUD / USD, and NZD / USD) 1 pip the value = USD 1, -.

If leverage is related to margin or security deposit per trade.

For example: you are trading with 1: 200 leverage, your guarantee fund (margin) is 0.5% of the contract value. The calculation for the margin value for the pair XXX / USD is: USD 100,000 x (lot size) x (% margin) x current market price. (Note: USD 100,000 is the contract size).

If you open a mini account with a leverage of 1: 200, and you buy 0.2 lot EUR / USD at the price 1.0650, then margin = (USD 100,000) x 0.2 x 0.5% x 1.0650 = USD 106.50. Thus your real resistance = (USD 1,000 - USD 106.50) / USD 1 (value per pip) = 893 pips. This means that if you lose 893 pips, you will be hit by a margin call, and your remaining funds will be USD 106.50 or equal to your margin.

But if you log into a standard account where the pip value for 1 lot = USD 10, - then your resistance (excluding margin) is USD 1,000 / USD 10 = 100 pips, which is very risky. Conversely, if you log into a micro (cent) or 0.01 lot account where the pip value for 0.01 lot = USD 0.1, - then your resistance (excluding margin) is USD 1,000 / USD 0.1 = 10000 pips. So adjust the lot size (volume) of trading with your capital size.

50 lots how many pips?

Can you clarify the meaning of your question again? However, if you mean how many pips you can hold when trading 50 lots, it depends on how much capital and leverage you use. For example, if you have a capital of $ 10000 and use 1: 3000 leverage, how many pips can you hold if you trade 50 lots of EUR / USD pairs? Here are the calculations. First, the margins required are:

• Margin = (Contract Sizez X Number of Lots X Running Price EURUSD) X Leverage
• Margin = (100000 X 50 X 1.1300) X 1: 3000
• Margin = (5650000): 3000 Margin = 1883.33

The margin required to open a position of 50 lots is $1883.33. The remaining free margin after opening the position is $8116.67 ($ 10 000 in capital minus $ 1883.33 in margin). This free margin is what serves as the security of the fund.

Meanwhile, to find out how many pips it can hold, the resilience of the funds needs to be converted. The pip value for EUR / USD for a position of 50 lots is $ 500. Then the free funds of $ 8116.67 are only able to withstand the movement of only 16 pips (8116.67 free funds divided by pips value). So in conclusion, opening a position of that size leaving only 16 pips of fund resilience in the most volatile pairs is a very risky move. Hope you can help.

I have $ 500 in capital using a scalping strategy with a leverage of 1: 500, for every open position I put 0.10 lots with the 1:2 rule (20-40pips). Is the money management of my trading plan right? Please give some explanation. Thanks

@Raul De La Cruz
If what you mean is a risk-reward ratio, then an adequate risk-reward ratio that can promise you benefits in the long term is a risk-reward ratio that is greater than 1:1. If you use a 1: 2 risk-reward ratio, then the risk-reward setting is included in the adequate risk-reward category. By using adequate risk-reward, in the future, you will still get consistent profits. Hope you can help.