Calculating maximum position size based on stop-loss and stop-out level

ice911

Trader
Sep 23, 2020
15
1
8
45
hi iam using robot for trading
i would like to know the formula to hold a position down to 40 pip loss for usdjpy
stop out 50%
leverage 500
 

ice911

Trader
Sep 23, 2020
15
1
8
45
i have calculate this 40 pip of loss=400$ for usdjpy
for a balance of 600$
leverage 500
stop out 50%
so i think its the 600-200
(600*105.331*500)/(105.331*100000)= 3 Lots
(400*105.331*500)/(105.331*100000)= 2 lots
so i think its 3 lots -2 lots= 1 lot of trading size to hold down to 40 pip of loss
but the suporrt of my broker say this
please try to understand, the maximum you can place 2 lots. and if you want to place 1 lot then your calculation is perfect.

so iam little confused

thanks for enlighten me
 

Enivid

Administrator
Staff member
Nov 30, 2008
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Odessa
www.earnforex.com
It would be helpful to know what exactly you are trying to calculate here.

What I can tell you is that if you open a 3 lots trade with the given conditions, you will have $600 in used margin and ~$600 in equity (minus spread). Once the loss reaches 40 pips (~$120, closer to $114 actually), your equity would be about $480, which would still be much higher than 50% of your used margin.

It looks to me, you can open a 3 lots trade with 40 pips stop-loss without a problem with your $600 balance, 1:500 leverage, and 50% stop-out level.
 

Enivid

Administrator
Staff member
Nov 30, 2008
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Oops... It's actually ~$1,200, not ~$120, if we are talking about standard pips (0.01). My statement above is still correct if we are talking about fractional pips (0.001).

The value of one standard pip when trading USD/JPY is 100,000 / Ask / 100 * Position_Size_in_Lots:
100,000 / 105.45 / 100 * 3 = $28.45

Hence, 40 standard pips loss x $28.45 is $1,138.

For fractional pips, the value is 1/10 of that.
 

ice911

Trader
Sep 23, 2020
15
1
8
45
check the discussion with my broker

Welcome to Coinexx

Patrik Kane 00:56
Hello Me
Hello and welcome to our live chat. I trust you are doing well today.
How may I Assist you?
Mr.e 00:57
hi wath is the trade size for 1000$ lev 500 usdjpy
Patrik Kane 00:57
Please allow me a min to check.
With 500x leverage you can go upto 5 lots of USDJPY with $1000 balance.
Me 01:02
ok and if i want to hold a position down to 40 pip of loss ?
are you there ?
Patrik Kane 01:05
Please bear with me
If you hold one position down to 40 pip of loss, then you can place 3 lots more on USDJPY.
Me 01:08
show me your calc pls
Patrik Kane 01:09
Allow me a min.
1 pip movement is equal to $10. and 40Pips down will be $400.

Then remaining 600 free margin is your account, which you cna use to place 3 lots os USDJPY.
Me 01:13
i do not understand
Patrik Kane 01:17
To place a 1 lot of USDJPY in your account, you need 199.98 USD ( aproxx 200 USD ) Now if you hold a poistion down to 40Pips, you are holding $400 of free margin as 1 pip movement is equal to $10.
Me 01:19
ok does is will be ok with with the stop out ?
Patrik Kane 01:22
Our margin call and stop out levels are 70% and 50% respectively.
if used margin is $1000 then in this case if equity drops $500, then your positions we will be stopped out by the system.
Me 01:23
ok but i do not want to be stop
does the trade will hold the stop out
Patrik Kane 01:26
Trade will stopout if you your equity drops $500
Me 01:26
my stop out is 50%
Patrik Kane 01:26
You can request for the 150% bonus if you want.
bonus will increase your equity and increase your margin to trade more number of lots.
Me 01:27
ok and with the 40 pip of sl does it will go to 50% of stop out or no ?
Patrik Kane 01:29
If you choose bonus, then your stop out level will be changed .
Me 01:30
i do not want the bonus
Read
Patrik Kane 01:30
Okay
Patrik Kane 01:30
Is there anything else I can assist you with for today?
Me 01:30
no thanks you helped me bye
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so in resume the formula is this
1000$ of balance
40 pip of loss=400$
((1000)*105.331*500)/(105.331*100000)= 5 lots
((400)*105.331*500)/(105.331*100000)= 2 lots
so its 5 lots-2 lots= 3 lots of trading size
 

Enivid

Administrator
Staff member
Nov 30, 2008
14,204
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Odessa
www.earnforex.com
Unfortunately, that formula is incorrect. If you take a 3 lot USD/JPY position with $1,000 balance, 1:500 leverage, 50% stop-out level, and 105.331 current USD/JPY ask, you will get stopped out before you reach your 40 pips stop loss.

Because with 3 lots, 40 pips loss on USD/JPY is $1,139.27 - you would have to get into negative equity on your $1,000 account balance.

The correct formula to determine the maximum position size for USD/JPY based on initial balance, SL, stop-out level, leverage, and the USD/JPY Ask rate:

Code:
Size = Balance * Leverage / (100,000 * StopOut + Pip_Value  * SL * Leverage)

In your case:

Code:
Size = $1,000 * 500 / (100,000 * 0.5 + $9.49 * 40 * 500) = 500,000 / (50,000 + 189,800) = 2.085 lots

Here is how to arrive at this formula:
Code:
StopOut = Equity / Used_Margin
Equity = Balance - Loss
Loss = Size * SL * Pip_Value
Pip_Value = 1,000 / USDJPY_Ask = 1,000 / 105.331 = $9.49
Please note, that the USD/JPY Ask rate to use here is the one that will be at the time of the position closing (i.e., your stop-loss level).
Code:
SL = 40 pips
Used_Margin = Size * 100,000 / Leverage
StopOut = 50% = 0.5
Leverage = 500
Balance = $1,000

Please let me know if you still need help figuring this out.
 

ice911

Trader
Sep 23, 2020
15
1
8
45
thanks a lot for your help
i make this excel table
base on your formula for 1000$ balance
 

Attachments

  • usdjpy forex fury table.xls
    388 KB · Views: 2

ice911

Trader
Sep 23, 2020
15
1
8
45
i dont understand why in my excel table
i only win 100$ on every trade despite i reinvest those 100$
is it normal ?
 

ice911

Trader
Sep 23, 2020
15
1
8
45
so the correct formula is like this
=E8*$G$1/(100000*$J$1+(1000/$F$4)*1000*$M$2*$G$1)
 

Attachments

  • usdjpy forex fury table.xls
    377.5 KB · Views: 1

ice911

Trader
Sep 23, 2020
15
1
8
45
ok so the lot size for 1000$ balance would be 9.69
 

Attachments

  • usdjpy forex fury table.xls
    46 KB · Views: 1