Forex Position Sizing.....

[damianoakley]

To all the Forex Traders out there.......I could use your help please.

I have been Spread Betting the USD Majors for some time using Deal 4 Free. I will be crossing over to FXCM to trade professionally, as I believe that as my dealing size increases, I would rather be doing business with the actual market than with a bookmaker.

Here's my query:

Can someone please help me get my head around the position sizing when trading actual currencies and not Spread Betting.

Let's say for example that I had £10,000 trading capital and wanted to risk 3% per trade (ie - £300). With spread-betting, I could quite easily calculate my position size in "pounds per point", but I'm struggling to translate this into FXCM.

I think I'm getting there but could do with someone's assistance please.

Many Thanks in advance.

Damian

 

[jpwone]

Hi Damian

with a FXCM mini account then each 10k of trade equates to $1 per pip as a rule of thumb for USD.

with a full account a single lot is 100K or $10 per pip.

So, as a guide I use $10k traded equals $1 per pip.

£300 roughly equates to $500 so divide 500 by stop (lets say 25) and that gives us 20 ie. $20 per pip.

$20 per pip on a mini account is 20 x 10k lots.
$20 per pip on a full account is 2 x 100k lots.

 

[Newtron Bomb]

FXCM has a live P/L tracking evertime the exchange rates move you can have this conversion in sterling, euros, etc

For example the current value per pip for euro/usd is 0.55p (gbp) for one 10000 lot on a mini account.
so two lots would be near to the £1 per pip that you are used to
@ £1.10

Happy trading
Newtron Bomb

 

[Newtron Bomb]

I'm clearly a slower typer at this ungodly hour lol

 

[jpwone]

LOL

 

[damianoakley]

Thank you all for your help - that's clear now......i think!

I'm gonna go do some maths - I may be back if I still can't make sense of it !

 

[darrenf]

If you get a demo account with FXCM, you can bring up a window on the prices screen which calculates the £ per pip for every currency. It took me a while to get my head around it, but once it clicks, it's actually quite simple. Most of the pip sizes are around the 50 to 60p mark, so it actually allows smaller positions than sb's which are £1 per point (with cmc).

 

[damianoakley]

Thanks for that.

Incidentally, in terms of day trading currencies, what do you think of FXCM compared to spreadbetting on D4F?

 

[options]

compare a chart of the same currency, same time scale, from both and see what u think. Smoother ride is with fxcm. U know how sb's jerk around.

 

[Newtron Bomb]

However, even though they jerk you around they can spike through your stop price, come back in your favour and not be stopped out... sometimes it is to your advantage.

There inefficiencies have kept me in a trade when i would have been stopped out with fxcm. and usually gone into a winning trade.

But like all things it is swings and spinny things and really down to your trading requirements as to which one you use.

Happy Trading
Newtron Bomb

 

[options]

simple answer is to use both!

 

[Newtron Bomb]

always the simple answers eh best of both worlds

 

[damianoakley]

Thanks.

I think I'd sooner trade FXCM and know where I stand, rather than have a price break through my stop and then be left wondering if I "might" have been stopped out!

 

[Newtron Bomb]

theres never been a "might" if it trades at that price they will execute it usually. but sometimes it gets overlooked and the price springs back in your favour. Ive never actually had a problem wondering if you will get filled or not.
FXCM do guarantee your stops in event like Saddam's capture when the markets actually gapped and they are the only peeps to offer this.

HTH
NB