Risk Management involves two important aspects: Lot Size Calculation and Risk Reward Ratio. MT4 Lot Size Calculator is exactly what you want, an indicator that can take care of the Position Size and show the Risk Reward Ratio.
Risk Management In Trading
One of the most important rules in trading is Risk Management!
Risk Management involves a set of rules to keep your account safe from unexpected events and “unlucky” times.
Often it makes the difference between a good trader and an amateur.
Risk Management includes concepts like Stop Loss, Position Size and Risk Reward Ratio.
Stop Loss is a price, or a distance from the open price, where you want to exit a trade.
The Stop Loss is your last call to exit a trade and is part of almost every strategy and trade that you execute.
So if you are in a trace and the price moves against the trade there is a price where the trade will be closed and the loss considered “accepted”.
As a general rule you should define the Stop Loss before entering a trade.
One of the most popular rules of risk management is to invest on each trade only a small percentage of your entire account.
This is to prevent your account to blow up in case of a strike of losing trades.
For example, if your position size is 25% of your account each trade with a strike of 4 losing trades you are left with almost nothing.
If you use only the 2.5%, after a strike of 4 losing trades you would still have more than 90% of your balance available.
Of course if the trades were winners the profit would have been higher, but we believe Risk Management is more important.
Once you decide a Stop Loss price, this will affect the calculation of the lot size, or position size for the trade.
Another factor to consider to calculate the lot size for a trade in Forex, or another Asset, is the amount you are willing to risk.
Depending on the strategy, usually you don’t want to risk more than 1 to 5% of your balance in a single trade.
You probably know that a common rule is to risk maximum 2% of your account.
Once you decide your strategy, risk and stop loss you can calculate the Lot Size.
Risk Reward Ratio
Another important aspect of each trade, or strategy, is the Risk Reward Ratio.
Risk Reward Ratio indicates the ratio between the profit and the loss expected in a trade.
If you see a Risk-Reward Ratio of 1/2 it means you are risking 1 to gain 2.
For example you set the stop loss for a trade to 100 pips and the take profit to 200 pips, this is a risk-reward of 1/2.
Lot Size Calculator Indicator For MT4
In normal circumstances you would need to calculate yourself all of these values.
However, there are also some indicators available that can do the job for you.
In this article you can see the formula and how to calculate the Lot Size through MQL4 language if you are interested.
If you want an easy and quick way to calculate the position size and see the risk reward ratio then MT4 Lot Size Calculator is what you are looking for.
Stop Loss And Take Profit Configuration
With this indicator you can easily set the stop loss and take profit directly from the panel and adjust with the chart.
Position Size Calculator
If you set a Stop Loss the indicator immediately calculates the Lot Size to satisfy the risk management.
Risk Reward Ratio Calculator
If you set both Stop Loss and Take Profit the indicator can show you the Risk Reward Ratio.
Risk Management Parameters
The indicator also allows you to change the base, percentage and amount you risk, for flexible calculation.
MT4 Lot Size Calculator is a great indicator to quickly see the ideal position size and risk reward.
This is a tool that can significantly reduce the time spent in this task and I really hope it will help you.
Please leave a comment if you have any feedback or Contact Us.