The principles behind lots trading and pips calculation

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The value of the forex lot applied to a trade will have a bearing on the risk profile for the account. I took some heat last night but woke up well rewarded. The feedback you provide will help us show you more relevant content in the future.

What you will learn:

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The risk to an account is a function of the account size, stop loss , currency traded, risk percentage applied and the Lot size. This is shown in this demonstration using a forex position size calculator. What lot size should be use to keep his account from being exposed to too much risk? We refer to a position size calculator to do the Maths for us:. We can see clearly that the trader can only use a maximum of 15 micro lots 0.

If the trader intends to take more than one trade, then the lot size must be divided by the number of trades to come up with a new lot size measurement which will stick to the limits of risk. We can see that the forex lot is an integral part of what traders must consider before putting on a trade. Traders must use lot sizes that conform to acceptable risk limits.

Lot sizes will therefore have to be considered when choosing a broker, when funding the account and definitely before putting on a trade position. Broker choice is important as some brokers may only permit certain trade sizes on their platform. It is one of the prerequisites to get familiar with for Forex starters. This is the standard size of one Lot which is , units. Units referred to the base currency being traded. Traders use Mini Lots when they wish to trade smaller sizes.

For example, a trader may wish to trade only 10, units. So when a trader places a trade of 0. There are many beginners or small investors who wish to use the smallest possible Lots sizes. In contrary to the Mini Lots that refer to 10, units, traders are welcome to trade 1, units or 0.

We need to calculate the Pip Value so we can estimate our profits or losses from our trading. The simplest way to calculate the Pip Value is to first use the Standard Lots. You will then have to adjust your calculations so you can find the Pip Value on Mini Lots, Micro Lots or any other Lot size you wish to trade. Our calculations in this sector are when your Base currency is the USD.

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It takes some heat, but always so far, has come out on the side of profit, well done. I have gone live this week with all 3 set files after running them on demo, and they are performing in my live account just like they did on my demo.