Forex Risk Calculator

Use our forex risk calculator to figure out your overall risk per position when trading the FX market. Our calculator will show you the correct position size based on your account capital, total risk in percentage, and your stop loss level in pips.

What is a forex risk calculator?

A forex risk calculator is a tool to effectively manage risk when trading the forex market.

Since forex leverage increases the risk substantially, the calculator comes in handy no matter what leverage ratio you choose.

The calculator helps you decide the correct position size by recommending the appropriate position size in lots and units and also by showing you the total risk in your currency.

It helps you determine how much money to risk per trade relative to your total capital, risk in percentage, and your stop loss level in pips.

The forex risk management calculator helps you avoid overexposing yourself to risk on any single trade which is one of the most important parts of risk management in trading.

How to calculate forex risk

Calculating your risk when trading forex is an important step in the preparation of a successful operation to minimize the potential loss.

In every high leverage trading strategy, risk management should be on the list of things to focus on before entering the market.

Here is a general approach to calculating forex risk:

1. Your total capital: Begin by assessing how much money you can allocate to each trade. From this pool of capital, you’ll decide how much money to allocate to each trade. I also advise you to select the best leverage ratio for forex as a way of protecting your capital further.
2. Figure out risk percentage per trade: Decide what percentage of your total capital you’re willing to risk on a single trade. I suggest that you don’t risk more than 1-2% of your total trading capital per trade.
3. Your stop loss level: Your stop loss is what ultimately will block the potential losses should a trade go wrong. Use our risk management forex calculator and play around with different stop loss levels to see which one suits your trade setup best. Our stop loss calculator is a good addition if you only want to know the correct stop loss level.
4. Calculate the risk in money: Make sure you know how much you are risking in terms of money per trade. For example, if your account size is $5000 and you are willing to risk 1% per trade, your total risk will be $50. Use the calculator to figure out this number.
5. Selecting position size: The position size is the most important part of your preparation. Use our forex risk management calculator to figure out the appropriate position size in lots and units. For example, if you want to risk $200 per trade and your stop loss is set 20 pips away from your entry price, with each pip movement worth $1, your position size would be 10 units.

By following these steps, you can calculate your forex risk so that it fits your trading strategy and risk tolerance.

As mentioned above, our risk calculator for forex does not take into consideration the forex spread.

Therefore, I recommend that you use our forex spread calculator to figure out the overall cost of the trade as well.

Forex risk formula

The forex risk calculator uses a straightforward formula for calculating risk:

Position size = (Account Size × Risk Percentage) / (Stop Loss in Pips × Pip Value)

When breaking down the formula, we see that the account size is the total amount of money in your trading account.

The risk in percentage is how much of the total capital you want to risk per trade.

You should be aware of all the risks involved with leverage trading before you get started, there are plenty of them.

The stop loss in pips is the number of pips you will allow your trade to go against you before you decide to cancel the trade.

The pip value is the value of one single pip movement in the currency pair you are trading. The pip value varies depending you the currency pair and the size of the trade.

Why do traders need a forex risk calculator?

A forex risk management calculator is used primarily because forex trading is by nature risky and it’s very common for traders to use calculators to minimize loss.

Since leverage trading increases loss, this is one of the most important steps for surviving as a trader.

It also makes you more disciplined as a trader if you always control the risk before you enter the market.

The obvious factor, loss, is the dominant factor that you are trying to prevent by using the calculator.

Trying to figure out your total forex risk manually can be very difficult.

So, if you are serious about your trading and you are focused on the long run, you should consider adding the calculator to your checklist.

Finally, every forex trading strategy can be improved by controlling the risk with a calculator and this is why many professional traders not only use a forex compounding calculator for long-term investment, they also take control over their risk.

Example of good forex risk management

When I trade forex I always follow the same set of rules to control and minimize my risk.

Before I start I decide on the leverage ratio I want to use.

This helps me choose my margin requirement as well as avoiding liquidation due to over-leveraging.

Then I set a maximum amount of risk per trade, for example, 2% of my allocated capital.

Then I make sure that my stop loss level is placed at a point where my trade hypothesis is confirmed wrong.

This might be 20 pips from my entry price or perhaps 200 pips from my entry price, it depends on the volatility and the price action of the market.

When it comes to position sizing I always use our risk calculator in forex to figure out the correct lot size and to match my total risk with the 2% rule I set earlier.

Of course, I always choose a high leverage forex broker that offers negative balance protection for maximum protection.