Risk managed by calculating the magnitude of a futures market deal, but it’s not something you can see at a glance. It complicated by a number of things. The tick sizes of futures contracts determined by the exchange, and these are important. A tick is the smallest price adjustment that made.
Future Market of Forex Futures :
Forex futures standardized futures contracts that allow you to buy or sell a certain currency at a predetermined date, time, and contract size. These contracts traded on one of the world’s many futures exchanges. Unlike forwarding contracts, futures contracts openly traded, non-customizable, and backed by a clearinghouse against credit losses.
Calculate Your Maximum Risk.
The amount of money in your trading account that you are willing to risk on a single deal is known as the maximum account risk. Many traders only risk 1% of their whole money on each deal. You may set your personal account risk limit per transaction to any percentage you like, although novices are best off risking little sums on each trade. Even if you suffer a string of losses (as many traders do), you will only lose a few percentage points of your account worth. It’s simpler to recuperate your losses if you keep your losses under control.
An Example of Trade Size Calculation
Assume you have a $10,000 futures trading account and are ready to take a 1% risk for every deal. That implies you may trade with a maximum risk of $100 each trade. The S&P 500 E-mini contract, with a tick size of 0.25 and a tick value of $12.50, is what you’re trading. You’d want to purchase at 1250 with a stop loss at 1249. (Four-tick stop-loss).
How many contracts should you buy to construct your position based on the information you have?
Use the Following Formula:
Position size = maximum risk in dollars (trade risk in ticks x tick value)
2 contracts = $100 / (4 x $12.50)
Each contract with that stop-loss level has a risk of $50 (4 ticks x $12.50), thus buying two contracts increases your overall risk to $100. You’ll be breaking your maximum risk guideline if you buy three contracts. You’re only risking half of your maximum permissible loss if you just buy one contract, which means you’re also restricting your profit possibilities.
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