# Benjamin Formula

## Benjamin Formula

**Hello everyone,**

**I'm having some trouble understanding how the two Benjamin Formula's are calculated. Below are the 2 formulas provided, can someone please explain how to calculated with an example please and thanks.**

**|E-S| < 2|T-E| and |T-E|L > 100**

**L = (.02A)/|E-S|**

Sun, 05/29/2016 - 2:48pm

I run my numbers slightly differently, but I ultimately get the same results.

Here's what I use:

potential loss: equity * riskPerTrade = (position size) * SL * (optional quote)

potential gain: TP ≥ SL.

where SL and TP are Stop Loss and Take Profit respectively

The "|entry - stop| < 2 * |target - entry|" part essentially gets one used to structuring trades with 2:1 reward:risk or better. I express that as TP ≥ 2 * SL.

The "lots = (.02 * account) / |entry - stop|" part essentially sets max risk to 2% of the equity and calculates the position size. Using my potential loss version of my formula, I'd solve for position size like the following:

position size = equity * riskPerTrade / SL / (optional quote)

Please note that the formulas defined in the Benjamin Formula docs all assume that EUR/USD is the pair (which implies that USD is the quote currency), and they assume that USD is the domestic currency (meaning the account is denoted in USD). My formula doesn't make those assumptions (and will work precisely as-is with USD cross currencies).

Combined the "|target - entry| * { (.02 * account) / |entry - stop| } > 100" essentially has one focus on 2:1 (or greater) trades, with at most 2% of equity at risk, and a $100 min profit. I express that as: $100 = (position size) * TP * (optional quote).

Below is an example of how to use these calculations.

I'll solve for position size (with USD/CAD=1.30988 [assuming USD is the domestic currency]):

position size = equity * riskPerTrade * (USD/CAD) / SL = $5K * .01 * 1.30988 / .0020 = 32747

check results:

(rounding down position size) 32K * .0020 / 1.30988 / ($5K USD) ≈ 0.0098

(rounding up position size) 33K * .0020 / 1.30988 / ($5K USD) ≈ 0.0100

I'll solve for position size (with USD/CAD=1.30988 [assuming CAD is the domestic currency]):

position size = equity * riskPerTrade / SL = ($5K CAD) * .01 / .0020 = 25K

check results:

25K * .0020 / ($5K CAD) = .01