A Week of Mastery Series

Risk management is one of the key aspects of successful trading. That’s why we want to ensure you understand its importance, and this assignment will help solidify that understanding.

As demonstrated during the workshop, there are various ways to calculate your position size to ensure you’re not over-risking. We covered three methods:

1. Using a Position Size Calculator EA in MetaTrader
2. Using an Online Position Size Calculator
3. Calculating Position Size Manually as Described Below.

The Assignment

We want you to take 2 trades per day for a total of 8 trades throughout the week starting Tuesday, after the conclusion of our risk management workshop. For every trade you take on your demo account your risk per trade must be exactly 0.25% of your account balance.

Below, you’ll find the formula to manually calculate your position size. Feel free to use any of these three methods to maintain consistent risk management.

The formula for calculating your position size is as follows:

(risk amount)/ ((pip value / 1.00 lot) x number of pips to SL)

Example:

• Account size: $10 000
• Stoploss in pips: 10
• Risk in %: 0.25%
• Risk in $: $25
• Pair: EURUSD

1. Calculate risk = 10 000 x 0.0025 = 25
2. Calculate lot size = 25 / 10 (pip value of EURUSD) = 2.5 / 10 (Stoploss in pips) = 0.25
3. Lot size = 0.25

Adjusting Pip Value for Different Currency Pairs

1. JPY Pairs (e.g., USD/JPY, EUR/JPY): Pip value is typically calculated to the second decimal place (0.01), and generally ranges from $9-10 per standard lot, depending on the exchange rate.
2. Non-USD Pairs (e.g., EUR/GBP, AUD/JPY): To convert the pip value to USD, multiply by the current exchange rate of the base currency against USD.

Good luck, everyone, and remember: risk management is key to long-term trading success!