Your toolbox position size calculator
Very straightforward answer to the risk-management problem in the Forex market is knowing how much you are risking per pip. Unfortunately, most traders don’t take the time to understand their risk profile, and what they could lose per trade. I believe that the fact that most traders focus on what they can gain instead of what they can lose, they tend to dig themselves into a deep hole rather quickly.
A position size calculator figures out how much each tick in a trade is going to be worth, and more importantly, the position size you need to use. You need to be cautious by applying too much leverage to your trades and using the calculator can keep you from doing so. For example, if you need a 100 pip stop loss, and want to keep your risk below a certain percentage, it’s a simple mathematical equation that the application will do for you.
If you look online, there are plenty of pip value calculators out there that you can use for free. The one at Baby Pips is one of the better ones and can be found at https://www.babypips.com/tools/position-size-calculator with its sleek form and simple interface. You pick the currency pair, the account balance, and then stop loss in pips. By default, you have an account currency of the US dollar. However, if you are using another currency as your base, you can adjust the base accordingly.
As an example, you might need a 100 pip stop loss and have a balance of $10,000 in your trading account. If you are trying to risk 1%, you simply hit the calculate button, and it gives you the position size in units, standard lines, mini lots, and micro lots. This is one of the most valuable tools out there that I have found.
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