Trader formulas
Five formulas you use every day.
Formulas
- Position size = money at risk / distance to the stop.
- R:R = (target − entry) / (entry − stop) for a long.
- Break-even win rate = 1 / (1 + R:R).
- Rough long liquidation price without fees = entry × (1 − 1 / leverage).
- Pips = (exit price − entry price) / pip size (0.0001, or 0.01 for yen).
Table: R:R and the win rate you need
| R:R | Break-even win rate |
|---|---|
| 1:1 | 50% |
| 1:2 | 33% |
| 1:3 | 25% |
| 1:4 | 20% |
Caveat
- The win rate ignores fees and slippage. In practice you need a margin on top.
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FxPro
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