One of the things I've noticed on various signal provider pages and on various forum posts is that people seem to always trade at a perfectly round lot size number, e.g. "I just bought 2 lots" or "I just bought 2.5 lots".
Very rarely will I see, e.g. 1.71 lots. When I see a number like that I associate that with a truly exponential money management system. But when I see a perfectly round number, I associate it with a degree of linearity.
While I was learning MQL4, I saw posts where people wanted to link lot size to their account balance, but not in the same way I would. They would want, for example:
$1000-$1999 balance = 0.1 lots
$2000-$2999 balance = 0.2 lots
etc.
Which makes no sense to me. Let's say the stop loss is 20 pips, then if you have a $1k balance and an order of 0.1 lots, then the risk would = 2%, which is fine. But if your balance is $1500, then using a 0.1 lot size and a 20 pip SL means the risk would equal 1.33%. If your balance is $1999, then your risk is 1.0005%. This is what I mean with the title, do people vary their risk % like this? It's only once you reach $2000, that you upgrade to 0.2 lots and return to 2% risk.
The following makes much more sense to me:
Balance / 10,000 = lot size
So if you have $1500, then the lot size is 0.15 and with a SL of 20 pips, then it equals 2%. If you have $1200, lot size is 0.12, which is still 2%, etc. It is always 2%.
Why do people use perfectly round lot sizes?
Very rarely will I see, e.g. 1.71 lots. When I see a number like that I associate that with a truly exponential money management system. But when I see a perfectly round number, I associate it with a degree of linearity.
While I was learning MQL4, I saw posts where people wanted to link lot size to their account balance, but not in the same way I would. They would want, for example:
$1000-$1999 balance = 0.1 lots
$2000-$2999 balance = 0.2 lots
etc.
Which makes no sense to me. Let's say the stop loss is 20 pips, then if you have a $1k balance and an order of 0.1 lots, then the risk would = 2%, which is fine. But if your balance is $1500, then using a 0.1 lot size and a 20 pip SL means the risk would equal 1.33%. If your balance is $1999, then your risk is 1.0005%. This is what I mean with the title, do people vary their risk % like this? It's only once you reach $2000, that you upgrade to 0.2 lots and return to 2% risk.
The following makes much more sense to me:
Balance / 10,000 = lot size
So if you have $1500, then the lot size is 0.15 and with a SL of 20 pips, then it equals 2%. If you have $1200, lot size is 0.12, which is still 2%, etc. It is always 2%.
Why do people use perfectly round lot sizes?