MT4 Position Sizing

I made a mistake and deleted my demo accounts on my phone, but it works out. Now, I can sync my desktop account with my phone, and set up alerts for potential entries and exits.

I have figured out few things today to help going forward.  For one, I began my last trade incorrectly in regards to the Trend Rider set up.

1. Watch for the EMA 12 to cross EMA 36 - cross above for potential long, below for short.
2. Wait for price movement to come down (or up respectively) and touch EMA 12. That's the entry point.
3. Set stop loss (S/L) at EMA 36.
4. Set profit target at twice to three times the stop loss above (or below) the entry point.
5. Exit when ADX 14 goes above and comes back down to 40.

The thing about this set up is that it neglects to mention the position size. That's where my studying comes in.  I spent a lot of time this morning before work as well as my lunch break, looking into percentage in points (pips) and position sizing.  A good youtube video that helped a little by Karen Foo really got me to start playing with some numbers.  There's even a mathematical mistake in the video, can you catch it?  I also read some articles online about it too. I'll try to reiterate it below for my readers, and also for myself.

Alright, let's take the currency pair, EUR/JPY (Euro and Japanese Yen) as an example.  The second currency, or counter currency is the one that sets the pip value.   Let's say the EUP/JPY exchange rate is 117.964.  That means 117.964 Yen for one Euro.  

My account's in USD though. So we use the USDJPY exchange rate. Let's say it's 106.278.  That's 106.278 Yen for 1 USD.  We're almost at position size. 

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Now, back to the Trend Rider. Let's say the 117.964 was my entry point and the EMA 36 is 30 pips below.  Since we're talking pips in Yen, that's 

(.01/pip)*(30 pips) = .3

30 pips below would be 117.964 - .3 = 117.664 = S/L

My target price (TP) would be 2(.3) = .6 above the entry price (60 pips... that's aggressive sounds to me).

117.964 + .6 = 118.564 = TP

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I got that part pretty well, now comes the position size.  So let's say I have $5000 in my account. I only want to risk 4% on this trade.

.04(5000) = $200.   In Yen,

 

200 USD*(106.278 Yen/USD)= 21,256 Yen.

21,256/30 pips = 708.52 yen/pip

(708.52 yen/pip)*(10 usd/106.278 eny)*10 = number of units = 667 = .007 lots = 7 nanolots of volume.  That should be the volume I enter into MT4.

It took me an hour to get that. I hope it's right. This is a confusing topic right now, despite reading and listening from 4 or more sources at this point.

Value/(lot*pip) 

More of this to come.

Next up is understanding how leverage/margin comes into the picture because my calculations didn't include any so far.