How to choose the optimal lot size.
Trading in the foreign exchange market involves consideration of many different nuances that affect the profitability and riskiness of trading operations, and some “little things” can play a crucial role in determining the situation on the stock exchange and significantly change the possible financial trading result.
Forex lot size is precisely the important point that should be taken into account by calculating the volume of future transactions.
The main thing to determine the ratio of the value of the lot and the deposit of its own, to identify the best indicator of the risk and the desired profitability of operations. Many traders do not even know how important this setting in the early stages of trading, trying to make a deal to the maximum extent. In this article I will try to tell you how the easiest way to calculate the optimal size of the forex lots.
One lot is equal to – 100 000 units of base currency in the currency pair traded, and hence should be based on producing trade account. Trade possible both lots integer and fractional parts thereof, which typically have a value equal to 0.1 or 0.2 to 0.5 of a standard lot.
If necessary, you can open the transaction and the amount of 0.7 to do this, simply write down the desired value in the window, which specifies the size of the lot
The optimum size of the transaction – this is the value at which your deposit is retained resistance to minor fluctuations in the trend, directed against the primary trend – kickbacks. Your order must not be closed in the event of the first correction that occurs on your trading time frame.
For the calculation used a little standard procedure, which consists of several stages.
1.Snachala analyze what size correction characteristic in our time frame, that is, identify inverse price fluctuations. For example, our maximum retracement is 20 pips.
2. Now he should be the lot size in relation to an available deposit, it must be such that even if we have to close the position of the stop-loss, the losses have not exceeded the allowable size.
There already must use the ratio of the value of one point to the available resources, if an item with the volume of transactions in one lot on the average is 10 dollars, then a correction of 20 points will cost our deposit at least $ 200.
And if we assume that the maximum loss is 5% of the size of the deposit must be at least $ 4,000.
Reducing the size of the forex lots to a value of 0.1, we can safely conduct transactions already with a deposit of $ 400, without subjecting it to great danger.
Based on this principle, the right amount of transactions for virtually any amount in the account, it should not be possible to calculate forget that 5% is the maximum amount of losses that you can afford as a result of a single transaction. Therefore, whenever possible, it is desirable to comply with an even smaller proportion.
Another guideline for you may be the amount of funds under the guarantee, it should not exceed 10-15 percent of the amount of funds on your deposit trader.
In general, the calculation of forex lot size is a purely personal matter for each trader, and depends on the strategy and the risks that you are trading, but still certain limits must be observed and not to open the maximum possible value of the transaction.
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