Need help with a forex related math problem - Aussie Stock Forums

Thread: Need help with a forex related math problem

1. Need help with a forex related math problem

I have a math problem:

I want to calculate how many pips away from my trade I put the stop loss so that if that stop loss is met, I will loose no more than 1% of my account.

The account will be in USD and I will only be dealing with USD currency pairs (ie, USD/CHF, AUD/USD, etc).

With x/USD currency pairs this is easy to calculate: If I have a \$500 USD account, 1% is USD\$5. Every x/USD currency pair will have USD\$0.10 per pip (for micro lots) therefore making the stop loss length \$5 / 0.10 = 50 pips away from my trade.

But, with USD/x currency pairs it gets weird. Basically I have to know how many pips away from the trade to equal USD\$5 if it is reached. But as the pip amount moves away, the rate changes, thus changing the conversion back to USD. So essentially, the USD\$ per pip changes based on how many pips away the stop loss is put, but on the other hand, the USD\$ per pip affects how many pips away it has to be for it to equal a USD\$5 loss.

Any math gurus out there who know the formula to calculate this?

To clarify:

I want x pips * USD\$ per pip = 1% of the account. This is where the stop loss will be placed. Calculating it is easy for x/USD currency pairs, but not for USD/x currency pairs.

Thanks heaps for any help that's offered. This is driving me nuts... lol.

2. Re: Need help with a forex related math problem

Your talking minuscule amounts just round it off.

3. Re: Need help with a forex related math problem

yeah but I still wouldn't mind knowing the actual formula to calculate it accuratly. It does make a difference of a few pips in the stop loss.

4. Re: Need help with a forex related math problem

Invert, always invert.

5. Re: Need help with a forex related math problem

FX is not that clinical, or accurate, particularly with the small amounts you are talking.

Take brokers always variable spread, data inaccuracy's, slippage etc and any such formula is irrelevant.

I would love it to be that precise, but pure and simple mate it's not.

6. Re: Need help with a forex related math problem

Originally Posted by ParleVouFrancois
Invert, always invert.
Originally Posted by cogs
FX is not that clinical, or accurate, particularly with the small amounts you are talking.

Take brokers always variable spread, data inaccuracy's, slippage etc and any such formula is irrelevant.

I would love it to be that precise, but pure and simple mate it's not.
Yes mate, I'd agree with these two posts.

Either invert or become a financial adviser or stand over man.

Then rob little old ladies and gents of their hardearned, to increase your capital, so that the maths would be immaterial.

gg

7. Re: Need help with a forex related math problem

Inversion as mentioned. A pip equates to .01% of quoted currencies. Exception being JPY which pip is worth 1% Yen.

8. Re: Need help with a forex related math problem

Ok, I'm probably gonna get flamed for this, but what do you guys mean by 'invert'?

Are you saying I'm looking at the equation the wrong way around or are you suggesting a technique or something?

edit: Or is it what Alpha_Bet said?

9. Re: Need help with a forex related math problem

Originally Posted by Helliune
Ok, I'm probably gonna get flamed for this, but what do you guys mean by 'invert'?

Are you saying I'm looking at the equation the wrong way around or are you suggesting a technique or something?

edit: Or is it what Alpha_Bet said?
Conversion equals .01% when USD is cross.
Example. Converting EUR/USD to USD/EUR .....EURO 1.20 = USD pip 0.000120.

Yen is 1%pt.

10. Re: Need help with a forex related math problem

Originally Posted by Alpha_Bet
Conversion equals .01% when USD is cross.
Example. Converting EUR/USD to USD/EUR .....EURO 1.20 = USD pip 0.000120.

Yen is 1%pt.
Thanks for clarifying that

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