Chapter 2  How to Calculate Position Size in Different Forex Pairs and Account Currencies

Let’s say you want to buy EUR/GBP and your broker account is denominated in USD.

How do you calculate your position size?

Remember, the value of a currency pair is in the counter currency.

If your trading account is funded with dollars and the counter currency in the pair you're trading isn't the U.S. dollar, you will have to multiply the pip values by the exchange rate for the dollar versus the counter currency.

If your account denomination is not in the currency pair traded, but the same as the conversion pair’s counter currency.

Example: USD account trading EUR/GBP

Now, you are in U.S. today and you wanted to open up trading account with a local forex broker, for you saw a great setup on EUR/GBP, and you has decided to trade with a 200 pip stop.

Step 1: Determine risk amount in USD

You’re back trading with U.S. broker selling EUR/GBP and you only want to risk 1% of your USD 5,000 account, or USD 50.

Step 2: Convert USD risk amount to GBP (GBP/USD=1.7500)

USD 50 * (GBP 1/USD 1.7500) = GBP 28.57

Step 3: Convert GBP risk amount to pips

Divide by the stop loss in pips: (GBP 28.57)/(200 pips) = GBP 0.14 per pip

Step 4: Calculate for position size

And finally, multiply by the known

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