Contract Size

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Given that

Standard contract size = 1 lot ($100,000)

Mini contract size = 0.1 lots ($10,000)

Micro contract size = 0.01 lots ($1,000)

is there a relationship between (0.01*AccountBalance) and ContractSize in money management? I'm trying to understand the differences between the money management system of using 0.01 lots per $1,000 of account balance and the ATR money management system of Risk*0.01*AccountBalance/(ContractSize*ATR).

Is the method of increasing or decreasing 0.01 lots per $1,000 of account balance already incorporated into the ATR money management formula through (0.01*AccountBalance)

OR would it have to be separately applied to ContractSize

OR does ContractSize have to be fixed units of $100,000, $10,000, or $1,000?

I know the answer must seem very basic but I've had two different EA builders question me on ATR money management and it's kind of difficult for me to explain something I don't fully understand myself.

 

You place the stop where it needs to be - where the reason for the trade is no longer valid. E.g. trading a support bounce the stop goes below the support.

given your initial stop and delta per pip per lot,

  1. risk.pips = open price (including spread) - ISL
  2. risk.perLot = risk.pips * delta.per.pip.per.lot
  3. risk.account = balance * percentage.
  4. Therefor lots = risk.account/risk.perLot

delta per depends on the broker's lot size (standard 1 lot = 100,000 or mini 1 lot = 10,000) and the pair (and pair price) and your account currency.

E.g. standard USD account trading the EURUSD. risk.perPips.perLot = $10.00. 2% of $1000 = $20. So you can trade 1.0 lots with a 2 pip ISL (assuming no spread) or 0.2 lots with a 10 pips (including spread) or 0.1 lots with a 20 pip spread or 0.01 with a 200 pip spread.

But you also have to verify that you have some free Margin at the most adverse excursion (the stop) not just at the time of opening, or you will get a margin call as the market moves toward the ISL.

When you have multiple open orders (multiple charts) you need to reduce by the MAE for all orders.

See my code
 

Okay...in trying to figure out your reply to my questions, unless I'm wrong, I'm concluding that the answer is

YES, ContractSize does have to be fixed units of either $100,000, $10,000, or $1,000 and that

YES, the (0.01*AccountBalance) in the ATR MM formula does size the lots to 0.01 per $1,000, dependent upon the applicable ContractSize.

Thanks.

 
ContractSize is implicit in the delta per pip per lot (along with pair and account currency exchange rates.) Irrelevant in my code.
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