💰 Lesson 5. How much in dollars?
When you analyze charts, you look at technical levels. You think about how many pips you can get in a trade. You can also see your open position’s profit or loss shown in your account currency.
Trader Festus: “What is the logic behind those numbers? How can I manage and control my profit?”
What will be your profit?
Imagine you had a great day and earned 1000 points. How much is it in dollars? That depends.
Think of it as the preparation of a meal. The bigger quantity of an ingredient you add, the more portions you will have. The dollars are your ingredients, input, or, if we choose to say, investment. The more you put at stake in a particular trade, the more you will get for profit. At the same time, your risks also increase: what if you choose the wrong temperature and ruin your dish? In this case, the fewer ingredients you spend to cook, the more you will have left.
Festus: “I see now. It’s like a proportion!”
Answer: Yes. You can manage your input in a trade. To do that, choose your trade size in lots. The more lots you trade, the more will each point of profit bring/cost in $.
Let’s see that in the example of EURUSD.
- If you open a 0.01 lot trade and your account is funded in USD, 1 point of profit = $0.01.
- If you open a 1 lot trade, 1 point of profit = $1.
So, let’s get back to our 1000 points.
1 lot → 1000 × $1 = $1000
Wow! That’s the difference!
Festus: “I have to think about this. New horizons are opening!”
Answer: Naturally, you will want a bigger gain. However, everything has to be balanced. What if you lose 1000 points? In this case, your loss will be either $10 or $1000. That got you thinking, right? Was it like a bucket of cold water?
How to choose trade size?
The most important thing is to manage your money. Doing so lets you control the risks and ensure that the amount you invest in trading will benefit you most.
Don’t put all your eggs in one basket!
Festus: “Eggs, basket – what? You’re losing me! I just want to trade now!”
Answer: That’s a saying, but it has a lot of wisdom. We’ll explain what it means.
A golden rule of trade volume
The optimal size of a single trade is 1-5% of your deposit.
In other words, if you want to spend $10 on a trade, you should have at least $200 on your account ($10 = 5% of $200).
Disciplined, patient traders follow this rule. Reckless traders don’t count money. Can you guess which traders keep and multiply their funds and which have their accounts blown out? Your goal is to be among those who trade with profit.
Festus: “OK, I’m not a mathematician, but this I can grasp: I multiply my account value by 0.05 and get my trade size in $.”
Why use the golden rule?
Imagine you used your entire account to open a trade. The trade goes wrong – you lose everything. Bad luck? Not exactly. It’s bad decision-making.
When you risk 5% of your account (e.g., $10 out of $200), you have enough money to open 20 trades. Even if only half are successful, with proper risk management you can end up with a profit.
Festus: “What if 5% of my account is too small to open a trade? My account is not big for now!”
Answer: The smallest trade volume is 0.01 lot (≈ $1000 notional). Leverage helps you open such a trade with a small amount.
The benefits of leverage
Leverage allows you to borrow money from the broker to open trades of bigger sizes. To open 0.01 lot ($1000), with 1:100 leverage you need $10 margin; with 1:1000 leverage you need only $1 margin.
You can choose leverage in your Personal Area settings.
Which leverage to use?
Bigger leverage = bigger boost, but also bigger risk. For beginners, 1:100 leverage is usually considered a good balance.
Festus: “I see now! I’ll start with 1:100 leverage, then!”
Choosing order volume
Combine the golden rule (1-5% of account) with leverage to determine your lot size.
If you have $20 as optimal trade size and use 1:1000 leverage, you have $20,000 for a trade → that’s 0.2 lots.
Example: $500 account, 5% risk, 1:1000 leverage → 500 × 0.05 × 1000 / 100,000 = 0.25 lots.
You can also factor in Stop Loss:
Example with SL
You buy at 139.100, SL at 139.030 (70 points). If your risk is $25 on a $500 account, then:
Lots = $25 / (70 × $0.36) ≈ 0.5 lots (point value ~$0.36). Use a Forex calculator for precision.
How much money to start trading?
Your deposit determines trade size – and vice versa. Below are safe options for beginners.
Deposit $100
3% risk = $3. With 1:1000 leverage, 0.01 lot → each point $0.01. Stop loss 300 points (affordable). Target profit 900 points ($9). Risk/reward = $3 / $9.
Deposit $500
3% risk = $15 → 0.15 lots (point value $0.15). SL 100 points. With 0.1 lot, SL 150 points, potential profit $45–$75.
Deposit $1000
3% risk = $30 → 0.3 lots. 0.1 lot with SL 300 points, potential gain $90. Optimal risk keeps account safe.
Festus: “By risking $3 in a trade, I’ll have a chance to earn $9! And if this trade goes badly, I’ll still have $97. Nice!”
Answer: True. This ratio (risk/reward) helps you stay profitable even with some losing trades.
Margin Call & Stop Out
Margin Call – margin level ≤ 40%. The company may close positions.
Stop Out – margin level ≤ 20%. Platform starts closing positions automatically to prevent negative balance.
Follow risk management, and you’ll stay safe from these.
Demo account practice
Use a demo account (up to $1 million virtual) to practice position sizing with the amount you plan to deposit. FPE demo accounts are perfect for realistic practice.
📌 Lesson summary
- The bigger the trade, the bigger the profit/loss per point.
- Limit single trade risk to 1–5% of your account.
- Leverage allows you to trade larger volumes with less capital.
- Deposit and trade size determine each other.
- Use risk/reward ratio (e.g., 1:3) to stay profitable.
Coming up: Next lesson – Buy or sell? Learn to analyze the market and make trade decisions.