# How to Allocate Correct Position Sizing in Forex?

A common question I have gotten asked over the years is how exactly to allocate position sizing in a Forex Trade correctly? Rightly so, as this can be daunting to those that are new to the concept and for those trying to do online. While there are a number of online tools online that can help with this, there is also an easy way to work out yourself with practice which I recommend to learn. That process once learnt and applied in trading can also make it smoother and quicker than finding that online tool as well.

In the video below I share a simple methodology where I go over how to do the process within minutes.

Above Video – In the Video above let me guide you on how to Allocate Correct Position Sizing in Forex.

## Summary – How to do it?

In summary as described in video above, take the allocated risk set from your initial risk amount.

So say as an example using the recommended 2% risk per signal amount would mean in a \$1000 dollar account \$20 dollars would be your allowed risk per trade. In another example, if say a \$10000 dollar account risk per trade amount would be \$200 dollars and so on. This is gotten by taking the account size and times by 0.02. So as an example \$10000 x 0.02 = \$200 dollars.

Then, take that allocated per trade risk amount and then divide by the amount of pips needed to give risk to a trade. So say a trade needs 50 pips risk divide it by 50. If 120 pips divide by 120.

As another example \$200 divided by 50 pips risk equals 4 or better said 4 dollars per pip or in units terms 0.4.
As another example \$200 divided by 120 pips risk equals \$1.66 per pip or better put rounding down to \$1.50 dollar per pip or in units 0.15.

It does take a little practice and time to get used to however try it yourself and see how you go.

Important: Be aware that average unit size examples in this post and video are based on the averages for a US dollar based currency Forex account. If your base Forex account currency is a different currency such as Pounds, Australian dollar, New Zealand dollar, etc, then unit sizes will vary accordingly to the conversion.

Timon Weller is the professional Writer and Trader behind the blog Forex Reviews. Timon Weller is also a professional Teacher of Price Action Trading and creator of the popular Training Series teaching people how to trade Price Action effectively called The Engulfing Trader. For other Forex Training available here at Forex Reviews click here.

1. Joao Pereira says:

Hi Timon,

Do you take into account the commission and swaps from your broker when calculate the risk, or you just ignore those values?

• Hey Joao,
Yeah, great question, I do take into account commissions and spread however that is a tiny aspect. Most good brokers these days spreads are tiny..

I do not however take into account swap on holding with risk though. The reason being is I balance what I trade between negative swap pairs and positive swap pairs. Keeping positive swap pairs side of pairs to the higher scale of position sizing.

Also as an option, one can use a no swap broker for the negative swap longer term holding positions where swap is a major cost.

Regards,

2. Wal says:

Hi Timon,
Wal Younger in Brisbane here. I Purchased “Engulfing Trader” earlier this year and thank you for your continuing emails and education. I intend to purchase more of your products as I like your style and whether it`s because your a local with an honest face I would like to work more closely with your methods in my future learning process.
Now to a totally unrelated matter. I seem to be being bombarded with “Binary Options” offerings lately with supposed automated profits almost falling from the sky so to speak. Is there any value in these schemes, or are they a huge con ? I would appreciate your comments please Timon ?

Kind regards, Wal Younger, Brisbane

• Hey Wal,
Thanks for getting access to the Forex Training at the website and for sharing the great feedback on the training as well. I appreciate it.

As for your question on Binary Options, they are best avoiding as they are not real trading. Overall binary options give Forex Trading a bad name by saying they are a type of trading but it is not true. First fault with them is most Binary Options providers are not regulated which means they can manipulate prices to their advantage. Secondly, if regulated they only offer 70% return on a put or call which means a trader needs to be right more than 70% of the time to just make break-even. So overall odds are against the trader.

However with normal trading you have complete control of both risk to reward and money management, which is essential part in trading overall. Not to mention, if trading from the major zones it is not uncommon to get 200% return or more per trade. By having that edge of risk to reward it puts odds in the traders favor as a probability business gain wise, something that binary options cannot do.

So overall, best avoiding Binary Options as a form of trading.
Regards,
Timon

3. Nick says:

Hi Timon can you please suggest a few REAL ECN Forex Brokers? Who can be trusted.
Thanks alot

4. Peter says:

Hey Timon
Thanks once more for this training and many more thanks to for all your lovely mails. They have been very informative and helpful I must say.

5. Abdelhaq says:

Thanks Timon

6. Abdelhaq says:

About Binary Options issue that you adressed above, I need just to confirm your opinion Timon. One of my friends lost \$10.000 with broker TRADORAX.COM !!! last month he had a balance of 9000\$ and he found that they blocked his account and when contacting support NO ANSWER !!! Also, many times they opened trades on his behalf even if hes asked them not to do so !!! Finally he lost all his money with them. He didn t lose trades I mean They STOLE HIS MONEY.