Alright, very first post. Haven’t thought about the structure of the blog, but a key topic that comes to mind is Risk Management.

When trading, it pays to know the maximum of what you are risking each time you initiate a trade. A clear-cut way is by a percentage of the Balance of your account, **AccountBalance()**, or specifically your available Free Margin, **AccountFreeMargin()**, which is the Balance when you have no open positions, or if you do, the margin not utilised by them.

Simply, if I want to risk 3% of my $10k account. That’s $300.

So now the question becomes, how large a contract size should I trade such that if my **stop loss** is hit, it is going to be $300?

This is dependant on how many **pips** your stop loss is.

E.g. if your stop loss is to be 60 pips from your entry price, therefore, 60 pips = $300, making 1 pip = $5.

*Before I go further, some definitions:-*

*Base Currency – USDJPY, EURUSD, GBPCHF*

*Quote Currency – USD*

**JPY**, EUR**USD**, GBP**CHF**

Deposit Currency – currency your Balance is inFor pairs with Quote Currencies as **USD**, e.g. EURUSD, AUDUSD –

1 pip for 1 standard lot is $10, therefore, your contract size should be $5/$10 * 1 lot = 0.5 lots

For pairs with Quote Currencies as **JPY**, e.g. USDJPY, GBPJPY –

1 pip for 1 standard lot is $12.99 (as of 2012-01-06 close), therefore, your contract size should be $5/$12.99 * 1 lot = 0.38 lots (rounded down)

For pairs with Quote Currencies as **CHF**, e.g. GBPCHF, CADCHF –

1 pip for 1 standard lot is $10.47 (as of 2012-01-06 close) , therefore, your contract size should be $5/$10.47 * 1 lot = 0.47 lots (rounded down)

For pairs with Quote Currencies as **GBP**, e.g. EURGBP –

1 pip for 1 standard lot is $15.43 (as of 2012-01-06 close), therefore, your contract size should be $5/$15.43 * 1 lot = 0.32 lots (rounded down)

For pairs with Quote Currencies as **SGD**, e.g. USDSGD –

1 pip for 1 standard lot is $7.73 (as of 2012-01-06 close), therefore, your contract size should be $5/$7.73 * 1 lot = 0.64 lots (rounded down)

As you can see, the value of 1 pip is different for different pairs, however, since you have adjusted the contract size accordingly per currency pair, 60 pips will always be $300, or 3% of your $10k account.

I’ll elaborate a little bit more on pip value in my next post.

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