Questions about lot size and money management
Posted: Wed Jun 03, 2009 6:40 pm
Hi, I am new to trading. I have a question about lot size and money management.
If I have an initial capital of $500 and playing with a leverage of 20:1, this would mean that I am able to control a maximum of $10,000 while trading. Let say that I want to risk 4% of my capital for each trade and have a stop loss of 20 pips. How do I determine the lot size
For example:
I am planning to trade the EUR/JPY with an initial capital $500 with a leverage of 20:1. If I am risking 4% of my capital, am I risking $400 ($10,000 x 4%) or $20 ($500 x 4%)? If I am risking $400 and I want to have a stop loss of 20 pips, does that mean each pip would represent $20? Also, if I am risking $400, would't I be risking 80% of my initial capital ($400/$500)?
Thanks
If I have an initial capital of $500 and playing with a leverage of 20:1, this would mean that I am able to control a maximum of $10,000 while trading. Let say that I want to risk 4% of my capital for each trade and have a stop loss of 20 pips. How do I determine the lot size
For example:
I am planning to trade the EUR/JPY with an initial capital $500 with a leverage of 20:1. If I am risking 4% of my capital, am I risking $400 ($10,000 x 4%) or $20 ($500 x 4%)? If I am risking $400 and I want to have a stop loss of 20 pips, does that mean each pip would represent $20? Also, if I am risking $400, would't I be risking 80% of my initial capital ($400/$500)?
Thanks