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$5 loss.
Any math gurus out there who know the formula to calculate this?
I want x pips * USD$ 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.