I have a slide, which I showed at the London Studio, showing two traders making identical trades. One put on the same size trade irrespective of the stop size and the other put on less the looser the stop was thereby keeping the amount of trading capital at risk constant.
The latter strategy prevents the risk getting bigger than intended:
risk = stop * lot
lot = risk / stop
For each trade, first calculate the percentage capital at risk (eg 1%) and then divide this by the size of the stop in points:
stop = 40 pips
risk(1%) = $1,200
Risk per pip = 1,200/40 = 30
or 30 mini lots per 40 stop trade
Morty Sill
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