How much should a new trader be risking? - page 6

[William Roeder]

maple: I've read a few articles that say "real traders never trade more than 1% of their equity" so if this is true and I have £500 equity in my account. The biggest lot size I should be taking is 5?

No, the biggest risk should be $5. Risk depends on your initial stop loss, lot size, and the value of the pair.

• You place the stop where it needs to be - where the reason for the trade is no longer valid.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.
• Account Balance * percent/100 = RISK = OrderLots * (|OrderOpenPrice - OrderStopLoss| * DeltaPerLot + CommissionPerLot) (Note OOP-OSL includes the SPREAD, and DeltaPerLot is usually around $10/pip but it takes account of the exchange rates of the pair vs. your account currency.)
• Do NOT use TickValue by itself - DeltaPerLot
• You must normalize lots properly and check against min and max.
• You must also check FreeMargin to avoid stop out

Assuming five digit broker and pair is about $1/point, a $5 risk with a (very small) 50 point SL is $5/$1/50=0.1 Lots maximum, not 5!