Position Size Calculator : Download FREE with Video Guide (MT4/MT5)
The Position Size Calculator for MT4 is a widely used MetaTrader indicator for calculating forex lot sizes. It serves as an essential risk management tool in volatile markets, providing the appropriate lot size for MT4 platforms based on your risk tolerance and trading balance.
This technical indicator assists traders in mitigating the risk of damaging their balance in a single trade. Additionally, it helps them determine the precise currency lot size to buy or sell, enabling them to effectively calculate their position size on MT5 Platform.
What is a position size calculator ?
Position size calculators for the forex market are used to determine the appropriate lot size, or the number of units that a trader should invest in a forex currency, based on their risk tolerance and account size.
I can tell you that position sizing is very popular among forex traders on the MT5 platform, particularly among scalping, intraday, and day traders. This is because they typically perform multiple and fast trades per day. As I explained in the graphic below, this allows them to manage their risk and maximize their outcomes on the MetaTrader trading platform.
However, it is important to note that no position-sizing strategy can completely eliminate risk. If a currency gap occurs below the stop-loss level, the risk limit may be exceeded. This is true for both MT4 and MT5 platforms.
How to position size with this calculator?
Setting account risk
Setting your risk percentage is an important step in determining your forex lot size. This limits the amount of money you risk per trade. Setting your account risk is the first step for using a lot size calculator for MT4.
For example, a trader with an account size of $10,000 and a 1% risk limit would risk a maximum of $100 per trade. If the risk limit was 0.2%, the maximum risk amount would be $20.
In conclusion, the dollar amount you risk per trade is determined by two variables:
- Your trading account size
- Your risk percentage.
You can define your risk percentage on MetaTrader, and it represents the maximum amount of money you are willing to lose on a single trade. This risk limit becomes your trading policy. The most popular risk percentage is 1% of the account size.
In short, the position size calculator for MT5 considers your account risk to calculate the appropriate position size for your trade.
Determining trade risk
I will now explain with a chart example of how to determine a trade risk using this chart.
- Stop-loss order
A stop-loss is a money management order that closes the trade at a predetermined level to limit potential losses. The difference between the entry price and the stop-loss level is called the pip risk.
- Pip value
A pip is usually 0.0001 for almost all of currency pairs, representing the 4th decimal place in a forex quotation. However, for the Japanese yen (JPY), a pip is 0.01, representing the second decimal place. The fifth decimal place (third for JPY) is called a pipette, and one pip is equivalent to 10 pipettes on the MetaTrader chart.
- Chart example
In the following example, we bought NZDUSD at $0.67900 and set the stop-loss at $0.68100. Therefore, the trade risk is 20 pips.
- Position size calculator
The position size calculator for MT4 determines the trade risk based on the entry and stop-loss levels
Position Size Calculation examples
The forex lot size calculator proceeds as follows:
- Lot size Size in terms of lots = (Dollar Amount of Account Risk) / (Pip Value x Trade Risk)
If your account is USD-funded and the dollar is the quote currency, then the pip value is equivalent to:
- $0.10 for a micro lot of $1,000
- $1 for a mini lot of $10,000
- $10 for a standard lot of $100,000
In the previous example, we had a $10,000 account. Therefore, the trade risk was $100 per trade. Additionally, we bought the NZDUSD at 0.6790 and placed a stop-loss at 0.6810. Consequently, the trade risk was 20 pips. Finally, applying the lot size formula, we get a forex MT5 position of five mini lots. To elaborate, the lot size calculation was as follows:
- Forex lot size = $100 / ( 1 x 20 ) = 5 mini lots
In conclusion, this MT5 position size calculator indicates a high leverage requirement for this trade.
Position size calculators for Metatrader are indicators that allow you to quickly calculate the lot size of your trades in MetaTrader 4. Lot size is based on your risk tolerance and account size, making position size calculators a quick way to compute your forex position size.
To use a position size calculator, simply download it for free and attach it to your MetaTrader chart. The calculator will automatically perform lot size calculations based on your account size and other relevant factors.
The figure below presents the main position size parameters:
- Account size: The total amount of money in your trading account.
- Risk tolerance: The percentage of your account balance that you are willing to risk on a single trade.
- Stop loss: The price level at which your trade will automatically close if it moves against you.
- Lot size: The number of units of the currency pair that you are trading.
Every market trade position is resolved through three steps. Firstly, account risk is determined. Secondly, trade risk is determined. Finally, we obtain the appropriate position size using this automatic calculator in your MT5 chart.
It’s worth noting that the lot size calculator in the MT4 platform is a renowned risk management tool. It helps you control risks to maximize outcomes. Moreover, identifying trades during the position sizing process is highly recommended.