Risk Management together with Leverage and Lot size

How to effectively calculate Risk and Reward. formula to use as well as tips to make it easy to understand.

It is necessary to work out and calculate very carefully, and preferably several times.

It is very much needed to make a proper plan to minimize the risks and try to make profit from this market. When you are going to make a strategy, you should keep in mind about the market situation.

I need some help, indeed.

understand that each trade consist namely of,
SL; R:R; and proper lot sizing, however I get confused with the part of margin & Leverage.

Using a local broker called Globex360 (SouthAfrica) and using a 1:100 account

I jusst need to understand how to do the calculations and which figures to use where.

Haven't even looked at any tools apart from support and resistance maybe some wick readings on various timeframes, still learning truly am enjoying it but need to understand it all abit better.

Dorigda posted:
It is necessary to work out and calculate very carefully, and preferably several times.

Can't agree more with you.

If you want to make a good career in this market, you have to make a proper strategy. You need to know how to manage the risks. a proper plan can make you rich in this risky platform.

Well, I don’t think that you need to do that manually because most brokers have calculators on their online platforms offering you to calculate risk and reward.

Failure to manage your risks and capital will lead you to rash mistakes and loss.

MarvinKops posted:
How to effectively calculate Risk and Reward. formula to use as well as tips to make it easy to understand.

It is quite easy. Lets say you want to risk 1% per each trade.
So you need to calculate value of 1 pip and set your TP and SL accordingly. P.S. if there is a gap over weekend your SL,TP wont be executed.
So the calculation. My favourite pair EUR USD. Account balance $100,000. 1% is $1,000.
The simplest example:
Buy 1 lot of eur usd at the rate 1.18000.
It does actually mean you spent $118,000 USD to buy 100,000 EUR.
So if the rate move to 1.19000 then value of position is $119,000 USD. You made $1,000 profit (minus spread, commison and sllipage)
So if the rate move to 1.17000 then value of position is $117,000 USD. You made $1,000 loss (plus spread, commison and sllipage)
So your SL and TP are 1.17000 and 1.19000 = 1,000 pips (pipetes actually)

Wanna more examples?

If you want to become successful in this market you need to deal properly with the risks. Proper risk management can ensure you a good amount of profit.

One needs to have a proper risk management to avoid the losses. In trading if you want to have profits then you should know how evaluate the risk.

It can be very useful if you can work out your trading and find the appropriate calculation on such trading lot, size, and many other.
You will need to do it more than once for accurate result.

MarvinKops posted:
How to effectively calculate Risk and Reward. formula to use as well as tips to make it easy to understand.

leverage and lot size goes hand in hand
higher the leverage lower will be you margin required
it means you are dealing in a 1 lot of eur/usd with 30x leverage you will only be needing
Leverage is what a trader borrows from the broker. In margin trading, you basically invest a portion of the amount you’re trading and the rest you borrow from the broker.
If your leverage ratio is 30:1, it means that with one unit of a currency you can hold 300. So 1 USD will be able to hold 30 USD. So your 30 dollars will only be used and rest is borrowed from the broker
The advantage of this is that you will be able to place trades on higher lots and earn big profits and moreover if you’re just a beginner in the trading world this might help avert any kind of major loss so to keep losses in check we opt for higher leverages Trading on a standard lot of usd requires 100,000 usd which is not possible so to make it possible leverage comes in to play
Most common lot sizes are
Standard 100000
Mini 10000
Micro 1000
Working on higher lots also increases the risk of greater profits if you are just a beginner you must try to trade on micro or mini lots

If you are using high leverage or want to use high leverage you must have a proper risk management plan in place.

It seems to me that regardless of the fact that you will use leverage or not, you still need to be able to manage risks, this gives you some security

From my experience, risk ratio and leverage are very important in trading. These factors help maintain discipline in trading as well as provide account security.

LyudmilLukanov posted:
If you are using high leverage or want to use high leverage you must have a proper risk management plan in place.

Yes. absolutely right.

if you think only high leverage ratio can bring good amount of profit then it could be dangerous in spite of having good risk management. so be careful when trading.

actually there is nothing 100% in Forex trading for that reason any kind of risk management works to fail most of the time.