Money Management

Determine your Lot Size

- sorry but we didn’t our youtube video

Calculate your Leverage

Your actual leverage is calculated by taking your net open trade position size and dividing it by your account equity balance.


So if you have a total open trade position of 250K, and an account equity balance of $10,000, your actual leverage in use is 25:1.
1 Pip = $25 and with a 10 pip stoploss, you would be risking 2.5% of your account balance: 10 pips x $25 = $250 /10000 = 0.025 == 2.5% Risk per trade

25:1 leverage is a dangerous level to play with if you want to trade for more than a few months.


Once you get on the right track, and can hit more winning trades than losers, we will revisit the leverage issue. But until then you need to play it more conservatively.


We eventually learned to only trade at a maximum 4:1 leverage per trade entry. But we try to add to winning trades as they take off in our favor. So we might end up with half a dozen open entries at 4:1 leverage each, for a combined 24:1 leverage. Account balance; $10000 and you enter a .4 lot therefore, 1 Pip = $4 (40,000 units)

Let’s make our default trade size a maximum 4:1 leverage trade. Lets also assume that Fridays are not a good day for a beginner to trade. Trust me on this. And lets make it your goal to lock in a net 20 pips gain every day at 4:1 leverage.


It can be a single 20 pip gain, or (2) 10 pip gains, or (4) 5 pip gains, the point is it’s all the same in the end.


The math comes out to this fact. Trading (4) days a week, locking in 20 pips profit a day at 4:1 leverage, your actual return on investment for that week is 3.2%. You scoff at a measly 3.2% right? What a waste of time you say…you could not be more wrong!


Even If you never increased your trade size the entire year, only kept your initial investment in the account, and stayed true to your 20 pips a day goal, that measly 3.2% weekly gain is an annualized 166.4% rate of return on your investment. Still scoffing at that? Didn’t think so.

Now many of you will do the math to check for errors. That is expected. Lets say you have a $10,000 forex trading account. In the above scenario your default trade size is 40K = 0.4 lot. You manage to net your goal of 20 pips a day for a weekly total of 80 pips per 10K lot = 0.1lot. So you take your 80 pips profit per lot x 4 (your 4:1 leverage = 0.4 lots) and you come up with 320 total pips for the week.


So for the week you made a profit of $320. Big deal you say, that is hardly worth the effort and I can’t pay the bills on $320 a week.


Exactly! You cannot trade for a living with a $10,000 account and expect to stay around more than a few months. You will always be trying to hit grand slams and your stops will become very wide as a result. You will lose your shirt in no time flat. Retail Brokers count on this.

Becoming a Day Trader

If you want to trade for a living, you need to figure out how much you need to make a week to live off, add a margin for unexpected expenses, and plug that into your goal as the outcome. Then work backwards to what size account you need to start with in order to be able to trade the goal and afford to pay the bills. Then you need to assume that you will not always make your goal no matter how hard you try.

I know this may sound like basic logic, but frankly most of us look past this point and ignore this fact. If you were able to make 10% a month with a $10,000 account, you would make $1000. 10% a month is huge in the investment, but $1000 is nearly enough to live off of and most importantly, you THINK that your time is worth more. For what reason, you want to become a successful trader right? And, you know that there are Millions of dollars that are waiting for you, once you can be a constant trader. So, what is the rush?

Trading Plan

10 pips a day

$100 account with a goal of 20% a month

1 pip will equal 0.01 lot which = 10 cents. Therefore 10 pips = $1

Your goal is to scalp for a total amount of 10 pips per day. This 10 pips will result in a 1% increase in your account

20 Trading days a Month, 10 pips a day, $1 a day, == $20 a month == 200 pips a month = 20% ROI

Now it is time to figure out your account balance size by determining how much $$ you Must make in order to survive