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
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.
The following user says Thank You to choke35 for this post:
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.