Making Money Online Blueprints
18
SEP
2016

How To Calculate Forex Volume Of A Trade

Forex Volume Calculation

When placing a trade using the Metatrader 4 platform, as well as specifying my Stop Loss, I also need to specify the Volume which will determine how much I am risking (and how much I will make if the market goes my way).

how to calculate forex volume and how to use in a metatrader 4 order

For Forex trades I use an online calculator, for example https://alpari.com/en/trading/calculator/

how to calculate forex volume-alpari.com forex volume calculator

 

In this example I want to be long (Buy) the EUR JPY:

Entry Price: 112.97 (which I put in “Opening Price”)

Stop: 112.58 (which I put in “Closing Price”)

Volume: 0.05

 

With this volume, it is stating my risk (“Profit”) is $19.20 which is what I want ($4000 account, I want to risk 0.5% which is $20).

If the risk is not what I want it to be, I simply change the volume and re-calculate until I know the volume I want.

 

Calculating Volume For Non-Forex Markets

But I have an issue.

When I want to trade other markets (Gold, the Dow, Caterpillar, etc), how do I calculate the volume as I haven’t been able to find an equivalent online calculator to the Forex calculator I use above.

In Metatrader 4 you can right click a market in the Market Watch window and select “Specification”

how to calculate forex volume - how to view market specification in metatrader 4

Deutsche Bank Trade Volume Example

This will give you all the specs for the market, e.g. for Deutsche Bank bank

how to calculate forex volume-deutsche bank market specification

Contract Size * Tick Value * Tick Risk * Volume Step
1 * 0.01 * 6 * 1

Entry: 13.30
Stop: 13.51
Tick Size = 0.01, hence risking 21 ticks

I want to risk $20, so calculation is

Volume = Risk Amount / (Contract Size * Tick Value * Tick Risk * Volume Step)
Volume = 20 / (1 * 0.01 * 21 * 1) = 95 (rounded)

 

Gold Volume Example

how to calculate forex volume - gold market specification

Entry: 1332.25
Stop: 1323.33
Tick Size = 0.01 hence risking 892 ticks

Volume = Risk Amount / (Contract Size * Tick Value * Tick Risk * Volume Step)
= 20 / (100 * 1 * 892 * 0.01) = 0.02 (rounded).

Also note the “Minimal Volume” = 0.01 so I am good trading with a volume of 0.02.

 

Mind The Bid / Offer Spread

Please note that the above examples do not factor in the bid / offer spread which for the major markets is small hence is makes very little difference to my volume calculation. But where the bid / offer spread is significant, simply add it to the size of your stop (i.e. if you have a 20 pip stop and bid / offer spread is 10 pips, you are effectively risking 30 pips so your volume calculation should reflect this).

About the Author
David Summer, father of three, living in the UK.

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