Now, returning back to the topic at hand, there are a lot of things you must do to be successful as a forex trader.
How to Calculate Lot Sizes
The key ones among them are:
- Trading with low leverage
- Engaging in long-term trading.
We are going to use a low leverage of 15:1 to illustrate that you can turn $100 into $1000 or more by trading long term.
If you are trading with a leverage of 50:1, trading with 30 percent of the money in your account as margin would be similar to trading the whole money in your account with a leverage of 15:1.
Initiating trade with just $100 would make your initial trade size equal to:
- 100 dollar x 15 = 1,500 units when you trade with 100 percent of the fund you have at 15:1 leverage.
On the other hand, when you trade with 30% of your entire fund with the leverage of 50:1, your trade size would be equivalent to:
- 30 dollars x 50 = 1,500 units (30 percent of your funds at 50:1 leverage)
This means trading the entire 100 dollars with leverage of 1:15 amounts to the same trade volume as trading 30 percent of 100 dollars with the leverage of 50:1.
If you are wondering how you can trade1,500 units with standard lot sizes, you may need to use brokers that make that possible like OANDA, easyMArketsand XM.
If for instance, we make 10 pips daily, then our profit would average 200 pips monthly.
At the end of each month, your total account size will be roughly $130.
- $0.15 per pip x 200 pips = $30 unattained profit
By standard, forex brokers incorporate your unattained profit when estimating accessible margin.
Thus, after one month, you’ll have 30 dollars utilized margin, 70 dollars unutilized margin, and an extra 30 dollars in unattained profit. To the broker, it will seem that you have 100 dollars margin available.
That is 70 dollars unutilized margin plus 30 dollars unattained profit, which implies that you can make extra trades in a pyramid manner.
If you only have 100 dollars to start trade without the leverage offer, then your subsequent trade volume would be very small because it implies you’ll be using only 30% of your unattained profit for a subsequent trade:
- 30 dollars x 0.3 = 9 dollars
- 9 dollars x 50 = 450 units
This would be the case if the only thing you have is 30 dollars in unattained profit.
That means your subsequent trade size will merely be using 9 dollars as margin.
But with the leverage, you’ll have for your first trade 1,500 units which returned 200 pips gain and you just added extra trade of 450 units.
This may not appear significant, but it actually means, you are currently attaining roughly a 30 percent boost monthly.
This can help you turn $100 to over $1000 and may help you get to one million dollars in three years!
Again, assuming you had $10,000 to trade, your first trade size would be equivalent to 150,000 units at the rate of $15 per pip.
Thus, your first month of profit would be roughly $3,000, and your subsequent trade size would be 45,000 units at the rate of $4.50 per pip.