An insight into using correct risk management when entering trades.
One of the toughest parts of trading is finding the correct risk management and applying the right lot sizes when entering a trade. Although it is down to the individual when deciding their strategy and risk amount; I'm going to share a couple of tools that I use daily when I calculate what lot sizes to use.
Stinu is a mobile app available on Apple Store and Google Play Store. It's used to calculate what lot size to use for each currency pair dependant on how much you want to risk. I will show you below how to use the app.
Step 1: When opening the app you are greeted with a very simple interface as seen on the picture below. You are asked to enter the account balance, how much of your balance you want to risk on the trade and then how many pips on your stop loss, commonly I use 30 pips stop loss on every trade I enter. Once you have filled in with the correct information then click select currency pair.
Step 2: You are now moved on to a second page with a simple user interface and you select the currency pair that you are about to trade. In this example it's GBPUSD. Then you just click Calculate.
Step 3: Now you will be shown on the top right how much 3% of your £1,000 balance would be (£30) - this will vary depending on your input. You will also see on the left hand side the stop loss amount (30 pips) and to the right of that will be the calculated lot size (0.123). This tool is great to perfect your risk management when applying lot sizes.
Do remember, trading is risky and your capital is at risk. If you do not implement good risk management then it becomes gambling. Do not trade if you do not know what you are doing. Learn before you earn!
The risk examples above are ones similar to what I would use, it varies between 1-3% for me and is a common percentage to risk when trading.
Hope you enjoyed this free tip and find the tool to be useful in your trading career.
Thanks for reading!
- Dan Legg