- Does Higher Leverage Mean Higher Profit in a Trade for the Same Amount of Points
- HELP with min lot size
- Calculating Lot size
Leverage is irrelevant when calculation your risk based on Stop-Loss, Tick-size and Tick-Value. It is not part of the equation!
Free margin (aka Leverage) needs to be checked to prevent Margin Call or Stop-out, but not for the risk calculation based on stop-loss!
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William Roeder, 2021.07.31 21:59
Risk depends on your initial stop loss, lot size, and the value of the symbol. It does not depend on margin and leverage. No SL means you have infinite risk. Never risk more than a small percentage of your trading funds, certainly less than 2% per trade, 6% total.
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You place the stop where it needs to be — where the reason for the trade is no longer valid.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.
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AccountBalance * 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.)
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Do NOT use TickValue by itself - DeltaPerLot and verify that MODE_TICKVALUE is returning a value in your deposit currency, as promised by the documentation, or whether it is returning a value in the instrument's base currency.
MODE_TICKVALUE is not reliable on non-fx instruments with many brokers - MQL4 programming forum 2017.10.10
Is there an universal solution for Tick value? - Currency Pairs - General - MQL5 programming forum 2018.02.11
Lot value calculation off by a factor of 100 - MQL5 programming forum 2019.07.19 -
You must normalize lots properly and check against min and max.
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You must also check FreeMargin to avoid stop out
Most pairs are worth about $10 per PIP. A $5 risk with a (very small) 5 PIP SL is $5/$10/5 or 0.1 Lots maximum.
The equation for risk based on the amount risked percentage of the equity or balance, lacks something which is quite slippery to get but one of the ways to grasp it is based on leverage.
When for instance we have a 1K $ account and we risk 2% which is 20 $ we can do it in many ways. (I will use extreme examples to illustrate the point)
One way for instance is to risk 200 pips of 0.01 volume on USD. This means we opened a 0.01 lot which is a leverage of 1.
Another way is to open a 5 lot position, and risking 0.4 pips. This means we opened 5 Standard lot which is leverage of 500.
Both comply with the risk formula as both risk only 2 percent of balacne but:
The second one is much more risky as it will tend to lose almost always, and one way to avoid those risks is to use leverage restriction.
You misunderstand. I did not state that leverage is unimportant. What I stated was that it is not part of the equation used to calculate the risk based on the Stop-Loss. The risk posed by leverage is calculated in a completely different way and separately from the Stop-Loss risk. Both types of risk need to be analysed and considered, but their calculations should not mixed up with one another.
It depends on situation. Many times, it can be totally disregarded. If the total maximum number of orders placed by all EAs, and their respective total stop-loss risk percentage for the batch, has been properly predefined and limited for the portfolio on the account, then margin considerations will not be required.
It is just when you have run-away cases or improperly defined portfolio risk, or ad hoc trading, that margin considerations need to be taken more seriously.
It is a lack of understanding and experience by traders, that usually leads them to risky situations in regards to margin and leverage.
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