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Maximum Positions increase


Maximum Positions increase

I just noticed the figure in Alveo for the maximum position size allowed for my demo account has gone up a bit.  How does that work?  Is there a set of rules, for how that happens?  If I have more than one demo account, does it affect all of them?  Same rules for a funded account?

Wed, 07/08/2015 - 8:55am

We have 20:1 leverage (per account).



The maximum position size will increase, or decrease, based on your account balance. The calculation is done when you open Alveo and it is account specific.

Chuck B

The relationship between Account Equity and Maximum Position Size is [based on the 20:1 leverage Hak mentioned above]:

Equity / 5000 = Position Size; thus Position Size x 5000 = Equity

Example: Equity = $10,000 [= Simulated Acct. initial value]: Position Size = 10,000 / 5000 = 2.0 lots

- Chuck B

PS: In all fairness, I believe I got this from something Hak posted recently in one of Todd's DFF classes :-)


hi, all:

here is how position size calculate:

1) Max total lots for all positions = $balance X 0.2% , i.g. 10,000 X 0.02% = 2.0 lots
2) max lots per position = $balance X 0.005% . i.g 10,000 x 0,005% = 0.5 lot



TQ: Your calculation (1) does the same thing as mine--except I derived my formula using a slightly different method. Chuck's equation is a (simplified) variation of my general equation (which I can choose to express the results in lots or otherwise).

The primary reason, why I initially mentioned the leverage, is the leverage ultimately determines one's cumulative max for all positions.

The unsimplified version of my formula is:
1-a) cumulative max position(s) = equity / leverage (actual max position [except for XAU/USD])
1-b) cumulative max position(s) = equity / leverage / 100K (max position expressed in lots [except for XAU/USD])
2-a) cumulative max position(s) = equity / leverage (actual max position [for XAU/USD--and other metals--only])
2-b) cumulative max position(s) = equity / leverage / 100 (max position expressed in lots [for XAU/USD--and other metals--only])

Apiary allows us to use up to 20:1 leverage; Divisa allowed us to use up to 100:1; and US brokers are required to cap that max at 50:1 (but optionally could permit lower leverage).

I'll provide examples of the calculation with a) equity=$10K and b) equity=$2.5K, using equation 1-a, for each of the 3 leverage ratios. That way one can see this in action, and use the formula(s) appropriately even for one's retail trading.

cumulative max position(s) = ($10K) / (1/20) = ($10K) / .05 = 200K (or 2 standard lots)
cumulative max position(s) = ($10K) / (1/100) = ($10K) / .01 = 1M (or 10 standard lots)
cumulative max position(s) = ($10K) / (1/50) = ($10K) / .02 = 500K (or 5 standard lots)

cumulative max position(s) = ($2.5K) / (1/20) = ($2.5K) / .05 = 50K (or 5 mini lots)
cumulative max position(s) = ($2.5K) / (1/100) = ($2.5K) / .01 = 250K (or 2.5 standard lots [or 25 mini lots])
cumulative max position(s) = ($2.5K) / (1/50) = ($2.5K) / .02 = 125K (or 1.25 standard lots [or 12.5 mini lots or 125 micro lots])

NOTE: Please keep in mind that most brokers, who do allow FX trades with the metals (e.g. XAU/USD), often will allow trading them with considerably less leverage. For example, I've seen several brokers provide up to 4:1 leverage for XAU/USD (and a different rate for the other metal pairs).


One more thing. . . . When placing trades, it's important for one to NOT trade fully loaded (meaning deploying 100% of one's trading capital), so that one will leave some wiggle room. I'll provide some calculations (in a moment) that will help to illustrate why trading fully loading might be A BAD IDEA.

Let's consider how far a fully loaded position would have to move (in pips) for a 1% drop in equity (assuming 20:1 leverage): ($10K) * .01 / 200K = .0005 (or 5 pips).

That also means one would completely wipe out one's $10K account, when trading fully loaded, if the market were to move 500 pips against that/those position(s).

Also, keep in mind--after the initial loss ($100)--a future 1% loss would result in a smaller amount lost ($99); yet, the amount of pips (also 5) for the 2nd loss would remain the same.


Great. Very clear. Thanks for the explanation.