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Constant Risk / Variable Range
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Constant Risk / Variable Range

  #1 (permalink)
Trading Apprentice
Frankfurt am Main
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: KO Certificates
Posts: 4 since Mar 2016
Thanks: 1 given, 1 received

Constant Risk / Variable Range

My objective is to have a similar if not equal amount of money at risk with every single trade (say 200$). Stop Loss and Take Profit are different with each trade but known before entering a trade.

I'm trading indices such as GER30, US30, JPN225, NAS100, HKG33, EUSTX50 and SPX500 which come in different currencies. The problem is that an equal range trading the HKG33_CFDHKD or the JPN225_CFDJPY yields less US$ per pip than when trading the GER30_CFDEUR.

As far as i'm aware of, the differences are a) the ranges itself (i.e. Entry - TP/SL) b) yield per pip and c) the exchange rate from the index currency (e.g. JPY) to the account currency (USD).

In order to have an equal constant amount at risk with each trade I'd like to dynamically adjust the quantity of CFDs traded.

My approach was to divide the amount at risk by the range traded.

Range = 10050 - 10000 = 50pip
Risk amount = 200 $
Yield per pip (FXCM) = 0.1

So I'd calculate the no. of CFDs:

CFDs = (Risk / Range) / Yield per pip = (200/50) / 0.1 = 40

I'm now thinking that the missing parameter may be the exchange rate to be considered when trading indices. is there a means of using the applied "rate" in NT7 (as displayed in the executions tab)?

Or are there any other approaches to keeping the money at risk constant with each trade despite varying ranges traded?

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  #2 (permalink)
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  #3 (permalink)
Market Wizard
Futures Experience: Intermediate
Platform: Other
Favorite Futures: ES, YM, 6E
Posts: 2,660 since Feb 2013
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Keep in mind that your so-called "risk amount" has nothing to do with the market risk that you
incur when you open a position. So let's better call it what it is: your intended stop loss.

In case of disruptive events you can easily owe the equivalent of a car or a house to your bucket shop
with that approach. The CHF e.g. taught many people expensive lessons about the difference between
risk and intended stop loss.

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  #4 (permalink)
Trading Apprentice
Frankfurt am Main
Futures Experience: Intermediate
Platform: NinjaTrader
Favorite Futures: KO Certificates
Posts: 4 since Mar 2016
Thanks: 1 given, 1 received


Indeed I don't mean the stop loss price in any given instrument but the actual gain/loss to my account which I want to limit acc. to the range traded. Slippage and unforeseen market movements are a risk everyone active in trading will need to consider.

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