Stop Loss, Risks & Standard Lots

Hey Everyone,

Just some update on some matters that caught our attention the past week (thank you for those you gave feedback).

Here are the questions that we have received:

1) How do I determine my Stop Loss?

2) Risks and Standard Lots. How do they play a role?

I'll start with part 2.

The Golden Rule for traders is that you must NEVER trade more than 3% of your capital per trade. Do not trade more than that. 

To minimize your loss, I also mentioned about your Lot Sizes remember that? :) 

Lot Sizes are the number of units we trade. 

1 Standard Lot = US$10 

To determine an appropriate Lot Size I recommend for you to follow this formula:

Lot Size =           Risk x Capital             

                (Stop Loss Pips x Pip Value)

Example: 

Risk is 3%

Capital is US$5000

Stop Loss Pips (number of pips from your Entry Point to Stop Loss) is 30 pips

Pip Value (as usual) is US$10 per pip

Therefore: 

Lot Size =    0.03 x 5000   

                     (30 x 10)

             = 0.33 standard lots

Now how to determine the Stop Loss?

Always remember that YOU MUST NEVER GO MORE THAN 3% risk. 

So if Risk is 3%

Again if Capital is US$5000

  3    x 5000

100

= US$150 

and if it is 1 pip = US$10
and number of pips = x

   x =  US$150

            US$10

   x = 15 

For this example you should put your Stop Loss 15 pips below your Entry Point. 


I hope this helps some of you. Always remember the 3% risk and do not predict, always react (Mario Singh). 


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Regards,
Joe