calculating position size?

[foredog]

If you got to the toolbars in oanda thre is a pip calculator, that will tell you how much you're trading, i think you've traded 1000 which is about 10c a pip.

If you're wanting to risk £2.62 per pip why have you put in 1000?

It would surely be some multiple of 262, eg 2620 or 26200

 

[olweiser]

Honestly, I have no clue how this is calculated. Oanda state 1 unit=1 base currency: gbp/usd: 1 unit=£1. On the calculator it shows 14,111 units make 1 PIP = £1 (and these units fluctuate with the market)

 

[foredog]

Honestly, I have no clue how this is calculated. Oanda state 1 unit=1 base currency: gbp/usd: 1 unit=£1. On the calculator it shows 14,111 units make 1 PIP = £1 (and these units fluctuate with the market)

When trade a currency pair, the pip value is the second currency

GBP USD===$

EURGBP===£

So to bet £1 per pip you need to bet 1.411 dollars.

ok so if £1 = 14111 units and you want to bet £2.62 then it's 2.62* 14111 = 36970

and i'm sure you said your stop is roughly 380 pips

380* 36970= 14048600 Or $1400 (14048600 / 10000) = £1000 (roughly)

 

[olweiser]

Thanks foredog.

The profit calculator is slightly misleading at first sight. "14,111 units make 1 PIP = £1"
this actually translates to 1 pip=£1.

What I've found strange in my new world of trading is these fundamental calculations that are required by anyone even considering trading are difficult to find in written, clear data. I've been on loads of sites and I keep getting different calcs to get to the same result - it makes it very confusing.

May I ask, is their a document/book/spreadsheet/formula I can read somewhere that gives me a breakdown of all the calculations needed that I can revise and test time over to get a full understanding of the fundamentals?
i.e.
calculating pip size, trade size, units, lots, etc....
Each calculation on its own isnt sooo difficult, its the cumulative calcs that make me forget the first one ;-)

 

[olweiser]

380* 36970= 14048600 Or $1400 (14048600 / 10000) = £1000 (roughly)

why do we divide by 10000?

 

[foredog]

Can't think of anywhre i've seen a list

I'd guess it's

a Calculate Risk for trade (eg 1% of account)

b Convert this amount into the currency that moves (eg GBPUSD $$$)

c Calculate stop distance

d divide b by c

 

[foredog]

why do we divide by 10000?

becasue with oanda 10000 is $1 i believe

 

[olweiser]

is it fair to say then that the calculations for gatting trade risk, pip size are standard - its the differences in forex providers that cause the calculation difficulties?

i.e. if I know that 1000 (1%) /380 (pip risk) = $3.68/pip.
then further calcs are needed to trade correctly on whatever platform I'm using...

 

[foredog]

is it fair to say then that the calculations for gatting trade risk, pip size are standard - its the differences in forex providers that cause the calculation difficulties?

i.e. if I know that 1000 (1%) /380 (pip risk) = $3.68/pip.
then further calcs are needed to trade correctly on whatever platform I'm using...

The trade size calculations are generally the same, it's just getting your risk into the right currency that will vary.

As you said different brokers trade in different sizes, you just need to find out what the standard size is for the broker you're using

 

[olweiser]

Thanks again foredog.

Now, I know how to calculate pip value, and using oanda I can work out the profit (sell price - buy price) * units * exchange rate.

HOWEVER, how come if I work out a pip value to be, lets say $1.50, with pip risk 200 - that works out at $300 profit.
Using the profit formula above, it doesn't work out like this at all.

example:
gbp/usd buy long @ 1.4111, close @1.4311 (200 risk) 1% (1k acc. risk)
1000*1.4111=$1411.
1411/200=$7.055/pip

Working out profit:
(1.4311-1.4111) *1000 *0.70331 = $14.01 Profit

HELP?

 

[foredog]

Thanks again foredog.

Now, I know how to calculate pip value, and using oanda I can work out the profit (sell price - buy price) * units * exchange rate.

HOWEVER, how come if I work out a pip value to be, lets say $1.50, with pip risk 200 - that works out at $300 profit.
Using the profit formula above, it doesn't work out like this at all.

example:
gbp/usd buy long @ 1.4111, close @1.4311 (200 risk) 1% (1k acc. risk)
1000*1.4111=$1411.
1411/200=$7.055/pip

Working out profit:
(1.4311-1.4111) *1000 *0.70331 = $14.01 Profit

HELP?

The exchange rate moved.

Entry calculations is at 1.4111 so £1000 = $1411

but at exit 1.4311 $1411 = (1411/1.4311) = £985

 

[jeffsmith]

Thanks friend for giving such a nice information.

 

[olweiser]

yes, thanks foredog, you've been very patient - thanks for your help.

 

[foredog]

No problems, i'll let you know where to send the cheque when your profits strat rolling in!!