[{"data":1,"prerenderedAt":1257},["ShallowReactive",2],{"\u002Fglossary\u002Fwhat-is-forex-pair-correlation":3,"\u002Fglossary\u002Fwhat-is-forex-pair-correlation-related":302},{"id":4,"title":5,"body":6,"category":286,"date":287,"description":288,"draft":289,"extension":290,"meta":291,"navigation":289,"path":292,"related":293,"seo":298,"stem":299,"term":300,"updated":287,"__hash__":301},"glossary\u002F5.glossary\u002Fwhat-is-forex-pair-correlation.md","What Is Forex Pair Correlation? Hidden Concentration",{"type":7,"value":8,"toc":278},"minimark",[9,19,24,27,38,46,58,62,65,71,74,87,91,102,122,137,141,190,200,231,235,270],[10,11,12,13,18],"p",{},"Forex pair correlation is the degree to which two currency pairs move together, expressed as a coefficient between −1 and +1. It exists because every pair is a ratio of two currencies, so any two pairs sharing a currency are partly the same bet. A trader holding ",[14,15,17],"a",{"href":16},"\u002Fglossary\u002Fwhat-is-correlation-risk","three correlated positions"," is not diversified across three trades — they hold one larger position, sized by accident rather than by decision.",[20,21,23],"h2",{"id":22},"how-it-works","How it works",[10,25,26],{},"The coefficient is the covariance of two return series divided by the product of their standard deviations.",[28,29,34],"pre",{"className":30,"code":32,"language":33},[31],"language-text","ρ = cov(A, B) \u002F (σA × σB)\n\nρ = +1.0        identical movement\nρ =  0.0        unrelated\nρ = −1.0        exactly opposite\n|ρ| > 0.7       treat the two as one position for sizing\n","text",[35,36,32],"code",{"__ignoreMap":37},"",[10,39,40,41,45],{},"The mechanism is arithmetic, not sentiment. Long EUR\u002FUSD, long GBP\u002FUSD and long AUD\u002FUSD are three ways of being short the dollar; when the dollar strengthens, all three lose at once. Long EUR\u002FUSD, long EUR\u002FGBP and long EUR\u002FJPY are three ways of being long the euro. And a pair can be inversely correlated by construction: EUR\u002FUSD and USD\u002FCHF have the dollar on opposite sides, so long one and long the other is close to holding nothing at all while paying ",[14,42,44],{"href":43},"\u002Fglossary\u002Fwhat-is-a-spread","spread"," on both.",[10,47,48,49,53,54,57],{},"Two properties make it dangerous. Correlation is ",[50,51,52],"strong",{},"unstable"," — a coefficient measured over the last month is not a fact about the pairs, it is an observation about the last month. And it ",[50,55,56],{},"rises in stress",": exactly when diversification is supposed to help, correlations converge towards 1 as flows move into and out of the dollar wholesale.",[20,59,61],{"id":60},"why-it-matters","Why it matters",[10,63,64],{},"Risk from correlated positions multiplies rather than adds. Combined exposure follows the same rule as any two-asset portfolio.",[28,66,69],{"className":67,"code":68,"language":33},[31],"σ_total = √( σA² + σB² + 2 × ρ × σA × σB )\n",[35,70,68],{"__ignoreMap":37},[10,72,73],{},"At ρ = 0, two 1% positions combine to about 1.4% of exposure. At ρ = 0.9, they combine to about 1.95% — nearly the full sum. Three such trades, each within a sensible per-trade risk limit, breach the account limit together while every individual rule was respected.",[10,75,76,77,81,82,86],{},"This is how accounts with disciplined ",[14,78,80],{"href":79},"\u002Fglossary\u002Fwhat-is-position-sizing","position sizing"," still produce large drawdowns. Nothing in the rulebook was broken. It counted positions instead of exposure, and the ",[14,83,85],{"href":84},"\u002Fglossary\u002Fwhat-is-volatility","volatility"," of the combined book was two or three times what the trader believed.",[20,88,90],{"id":89},"what-the-data-shows","What the data shows",[10,92,93,94,97,98,101],{},"Across the public accounts on ShowMyTrades with trading history (August 2026), ",[50,95,96],{},"1,724,575 lots"," have been traded, and the median account holds ",[50,99,100],{},"171 closed trades"," — enough for concentration to be visible on the symbol breakdown, and enough for a single correlated cluster to dominate the record.",[10,103,104,105,109,110,113,114,117,118,121],{},"The drawdown distribution is where undeclared concentration shows up. ",[14,106,108],{"href":107},"\u002Fglossary\u002Fwhat-is-maximum-drawdown","Median deepest drawdown"," is ",[50,111,112],{},"9.7%",", but ",[50,115,116],{},"38.2%"," of accounts have fallen more than 20% from a peak and ",[50,119,120],{},"17.6%"," have lost over half their peak value. Losses of that size on an account trading small individual sizes usually mean many positions moved as one.",[10,123,124,125,128,129,132,133,136],{},"Offsetting the exposure instead of closing it has a running cost, and it shows up in the totals. These accounts have paid ",[50,126,127],{},"$4,782,670 in commissions"," and ",[50,130,131],{},"$862,547 in swap",", and ",[50,134,135],{},"86.3%"," of the accounts that hold positions overnight pay net negative swap. Two pairs held against each other keep that meter running while cancelling much of the risk they were opened for.",[20,138,140],{"id":139},"where-you-see-it-on-showmytrades","Where you see it on ShowMyTrades",[10,142,143,144,147,148,152,153,156,157,128,160,163,164,156,167,170,171,174,175,178,179,182,183,128,186,189],{},"The ",[50,145,146],{},"Breakdown Statistics"," module is the concentration check. Its ",[149,150,151],"em",{},"By Symbol"," tab lists every instrument the account traded with ",[50,154,155],{},"Longs",", ",[50,158,159],{},"Shorts",[50,161,162],{},"Total"," columns, each carrying ",[50,165,166],{},"Trades",[50,168,169],{},"Pips"," and profit, plus ",[50,172,173],{},"Won(%)",". Read the ",[50,176,177],{},"Currency"," column first: several rows sharing USD, all on the same side, is a single dollar position spread across tickers. The ",[149,180,181],{},"Chart"," view plots ",[149,184,185],{},"Trades by Currency Pair",[149,187,188],{},"Profit by Currency Pair",", so concentration in the largest few instruments is visible without reading the table.",[10,191,143,192,199],{},[14,193,195,198],{"href":194},"\u002Fguides\u002Fmagic-numbers-and-strategy-labels",[149,196,197],{},"By Magic Number"," tab"," does the same for strategies, showing whether one Expert Advisor produced every correlated row or several are colliding on the same currency.",[10,201,202,203,206,207,210,211,214,215,218,219,222,223,226,227,230],{},"In the ",[50,204,205],{},"trades table",", read the ",[50,208,209],{},"Open Time"," column and look for clusters: several tickets opened within the same minute on different symbols is a correlated entry, not a diversified one. The ",[50,212,213],{},"Custom Analysis"," slideover filters by symbols, magic numbers and ",[50,216,217],{},"Buy (Long)"," \u002F ",[50,220,221],{},"Sell (Short)",", so you can recompute the statistics with one currency group excluded and see how much of the record depended on it. The ",[50,224,225],{},"charts viewer"," ",[149,228,229],{},"Drawdown"," view then shows the effect: correlated books fall in one step rather than in several.",[20,232,234],{"id":233},"common-misunderstandings","Common misunderstandings",[236,237,238,245,254,264],"ul",{},[239,240,241,244],"li",{},[50,242,243],{},"\"A pair is one instrument.\""," It is two currencies. EUR\u002FUSD is a euro position and a dollar position at once, which is why it moves with everything else quoting either.",[239,246,247,250,251,253],{},[50,248,249],{},"\"The coefficient tells me how much to size.\""," It says how two positions move together, not how far. Sizing needs correlation and ",[14,252,85],{"href":84}," together: a tight correlation between two quiet instruments is a small problem.",[239,255,256,259,260,263],{},[50,257,258],{},"\"Correlation is one number per pair.\""," It is one number per pair ",[149,261,262],{},"per window",": two instruments can look unrelated hour to hour and move as one week to week.",[239,265,266,269],{},[50,267,268],{},"\"It only applies to forex majors.\""," Gold, indices and crypto pairs quoted against the dollar belong to the same cluster as EUR\u002FUSD more often than traders expect.",[10,271,272,273,277],{},"For reading concentration through volume rather than through profit, see ",[14,274,276],{"href":275},"\u002Fguides\u002Ftrading-volume-analysis","trading volume analysis",".",{"title":37,"searchDepth":279,"depth":279,"links":280},2,[281,282,283,284,285],{"id":22,"depth":279,"text":23},{"id":60,"depth":279,"text":61},{"id":89,"depth":279,"text":90},{"id":139,"depth":279,"text":140},{"id":233,"depth":279,"text":234},"Strategy","2026-08-19T00:00:00.000Z","Currency pairs that share a currency move together. Correlation measures how tightly, and it is what turns three separate-looking trades into one position.",true,"md",{},"\u002Fglossary\u002Fwhat-is-forex-pair-correlation",[294,295,296,297],"what-is-correlation-risk","what-is-volatility","what-is-position-sizing","what-is-leverage",{"title":5,"description":288},"5.glossary\u002Fwhat-is-forex-pair-correlation","Forex Pair Correlation","DjTTfH0Fxqi8uUIDqE9m2BfJJBAgW-YXUr2gcejQcgo",[303,620,840,1045],{"id":304,"title":305,"body":306,"category":609,"date":287,"description":610,"draft":289,"extension":290,"meta":611,"navigation":289,"path":16,"related":612,"seo":616,"stem":617,"term":618,"updated":287,"__hash__":619},"glossary\u002F5.glossary\u002Fwhat-is-correlation-risk.md","What Is Correlation Risk? Why Diversification Fails",{"type":7,"value":307,"toc":602},[308,311,313,320,326,329,396,399,402,444,447,449,455,463,471,473,490,498,510,512,563,565,595],[10,309,310],{},"Correlation risk is the exposure created when positions or accounts that look independent are driven by the same factor and therefore lose together. It is why an apparently diversified book produces a single, undiversified drawdown: the risk was counted once per position, but it arrives all at once.",[20,312,23],{"id":22},[10,314,315,316,319],{},"The pairwise coefficient belongs to ",[14,317,318],{"href":292},"forex pair correlation",". At book level what matters is how many independent bets it leaves you with.",[28,321,324],{"className":322,"code":323,"language":33},[31],"Independent bets = n ÷ ( 1 + (n − 1) × ρ )\n\nn = number of positions\nρ = average correlation between them\n",[35,325,323],{"__ignoreMap":37},[10,327,328],{},"Three positions each risking 1% of the account:",[330,331,332,348],"table",{},[333,334,335],"thead",{},[336,337,338,342,345],"tr",{},[339,340,341],"th",{},"Average correlation",[339,343,344],{},"Combined risk",[339,346,347],{},"Independent bets",[349,350,351,363,374,385],"tbody",{},[336,352,353,357,360],{},[354,355,356],"td",{},"ρ = 0",[354,358,359],{},"1.73%",[354,361,362],{},"3.0",[336,364,365,368,371],{},[354,366,367],{},"ρ = 0.7",[354,369,370],{},"2.68%",[354,372,373],{},"1.25",[336,375,376,379,382],{},[354,377,378],{},"ρ = 1",[354,380,381],{},"3.00%",[354,383,384],{},"1.0",[336,386,387,390,393],{},[354,388,389],{},"ρ = −0.5 (the floor for three)",[354,391,392],{},"≈ 0%",[354,394,395],{},"—",[10,397,398],{},"The trader believed they had risked 1% three times. At ρ = 1 they risked 3% once. Nothing on the platform announces the difference.",[10,400,401],{},"Correlated exposure arrives through five channels, and most books carry several at once:",[236,403,404,410,421,427,438],{},[239,405,406,409],{},[50,407,408],{},"A shared currency leg."," Long EUR\u002FUSD, GBP\u002FUSD and AUD\u002FUSD is one short-dollar position in three costumes.",[239,411,412,415,416,420],{},[50,413,414],{},"One strategy across many symbols."," A single ",[14,417,419],{"href":418},"\u002Fglossary\u002Fwhat-is-an-expert-advisor","Expert Advisor"," trading twelve pairs generates twelve positions from one signal condition.",[239,422,423,426],{},[50,424,425],{},"One strategy across many accounts."," The same EA copied onto four accounts is one bet at four times the size; total capital at risk is what matters, not capital per account.",[239,428,429,432,433,437],{},[50,430,431],{},"A shared regime dependency."," Every ",[14,434,436],{"href":435},"\u002Fglossary\u002Fwhat-is-trend-following","trend-following"," system in a book suffers the same choppy market, whatever it trades.",[239,439,440,443],{},[50,441,442],{},"A shared venue."," Same broker, same price feed, same execution. A feed outage or a requote storm hits every position at once.",[10,445,446],{},"And ρ is not a constant: in quiet markets the components decouple and the book genuinely looks diversified, then in a liquidity event they converge toward 1.",[20,448,61],{"id":60},[10,450,451,452,454],{},"Correlation risk breaks the arithmetic ",[14,453,80],{"href":79}," depends on. A 1%-per-trade rule is a promise about the worst case, and it only holds if the trades are independent. Ten correlated positions at 1% is a 10% day through a rule followed exactly.",[10,456,457,458,462],{},"It hits ",[14,459,461],{"href":460},"\u002Fglossary\u002Fwhat-is-margin-level","margin level"," the same way: correlated positions move into floating loss together, so equity falls across the whole book while used margin stays put, and the stop-out threshold approaches faster than any single-position analysis predicted.",[10,464,465,466,470],{},"It also makes track records misleading. Four accounts each showing a modest ",[14,467,469],{"href":468},"\u002Fglossary\u002Fwhat-is-drawdown","drawdown"," may have printed all four on the same three days: four data points read separately, one in fact.",[20,472,90],{"id":89},[10,474,475,476,128,479,482,483,128,486,489],{},"On ShowMyTrades (August 2026), ",[50,477,478],{},"699 users run more than one account",[50,480,481],{},"429 run accounts at more than one broker",". Across the public accounts with trading history, median autotrading share is ",[50,484,485],{},"99%",[50,487,488],{},"53.9% run above 90% automated",". These describe accounts published here, not traders in general.",[10,491,492,493,497],{},"Those figures set the scale. More than half of all users hold multiple accounts and roughly a third spread them across brokers, usually to avoid depending on one counterparty. That diversifies the counterparty, not the strategy: if the same automated system runs on both, ",[14,494,496],{"href":495},"\u002Fguides\u002Fsame-strategy-different-brokers","two brokers deliver one equity curve twice",", and a near-total autotrading share makes that the default case.",[10,499,500,501,109,503,505,506,509],{},"The outcomes are consistent. ",[14,502,108],{"href":107},[50,504,112],{},", yet ",[50,507,508],{},"17.6% of accounts have passed 50%",". Falls of that depth are rarely one position going wrong; they are a set of positions that turned out to be the same position.",[20,511,140],{"id":139},[236,513,514,527,542,548,558],{},[239,515,143,516,518,519,521,522,526],{},[50,517,146],{}," module and its ",[149,520,197],{}," tab, which splits the record by strategy rather than by instrument. Two ",[14,523,525],{"href":524},"\u002Fglossary\u002Fwhat-is-a-magic-number","magic numbers"," with the same good and bad stretches are one system wearing two labels.",[239,528,529,534,535,128,538,541],{},[50,530,531],{},[14,532,213],{"href":533},"\u002Fguides\u002Fcustom-analysis-and-filter-presets",", which filters by ",[50,536,537],{},"Symbols",[50,539,540],{},"Magic Numbers",". Recomputing the figures with one magic number excluded shows how much of the record depended on it. The saved preset list is hidden on public pages; the filters are not.",[239,543,143,544,547],{},[50,545,546],{},"Growth"," view in the charts viewer, read across two account pages. Two curves with the same peaks and troughs on the same dates are one strategy whatever they are called.",[239,549,550,551,557],{},"A ",[50,552,553],{},[14,554,556],{"href":555},"\u002Fglossary\u002Fwhat-is-a-trading-portfolio","portfolio",", which merges several accounts into one aggregated view — equity curve, statistics and metrics combined. That total is what correlation risk applies to, not the per-account figures.",[239,559,143,560,562],{},[50,561,205],{}," with its Magic Number and Comment columns, showing which system opened what and when.",[20,564,234],{"id":233},[236,566,567,573,579,585],{},[239,568,569,572],{},[50,570,571],{},"\"I trade eight pairs, so I am diversified.\""," If seven quote against the dollar, you hold one dollar position sized eight times.",[239,574,575,578],{},[50,576,577],{},"\"Different brokers means diversified risk.\""," It diversifies counterparty and execution, which is worth having. It does not diversify a strategy running identically on both.",[239,580,581,584],{},[50,582,583],{},"\"Correlation is stable enough to plan around.\""," It is measured in normal conditions and converges toward 1 in the conditions that create large drawdowns.",[239,586,587,590,591,594],{},[50,588,589],{},"\"Long one pair and short a correlated one cancels the risk.\""," It replaces a directional bet with a cross bet, and you pay two ",[14,592,593],{"href":43},"spreads"," and two swaps to hold it.",[10,596,597,598,277],{},"For how to see combined exposure rather than four separate pages, read ",[14,599,601],{"href":600},"\u002Fguides\u002Ftracking-multiple-accounts-portfolio","tracking multiple accounts in a portfolio",{"title":37,"searchDepth":279,"depth":279,"links":603},[604,605,606,607,608],{"id":22,"depth":279,"text":23},{"id":60,"depth":279,"text":61},{"id":89,"depth":279,"text":90},{"id":139,"depth":279,"text":140},{"id":233,"depth":279,"text":234},"Risk","Correlation risk is running several positions or accounts that are really one bet. How correlated exposure multiplies drawdown, and what thousands of traders show.",{},[613,614,296,615],"what-is-forex-pair-correlation","what-is-drawdown","what-is-margin-level",{"title":305,"description":610},"5.glossary\u002Fwhat-is-correlation-risk","Correlation Risk","GNhwqG_ozOXL3dDKSqbVGKoxSZ4aW1o00RqKg9Mychw",{"id":621,"title":622,"body":623,"category":609,"date":287,"description":829,"draft":830,"extension":290,"meta":831,"navigation":289,"path":832,"related":833,"seo":836,"stem":837,"term":838,"updated":287,"__hash__":839},"glossary\u002F5.glossary\u002Fwhat-is-leverage.md","What Is Leverage in Forex? Formula and Real Numbers",{"type":7,"value":624,"toc":822},[625,628,630,633,639,642,690,693,696,708,710,713,716,732,734,737,744,747,749,752,786,788,814],[10,626,627],{},"Leverage is the ratio between the size of a position and the capital required to hold it. A broker offering 1:100 lets you control $100,000 of currency with $1,000 of your own money set aside as margin. It is a borrowing facility, not a strategy: it changes how much capital a trade ties up, and nothing else about the trade.",[20,629,23],{"id":22},[10,631,632],{},"Margin is the deposit the broker freezes while a position is open. The arithmetic is short.",[28,634,637],{"className":635,"code":636,"language":33},[31],"Position value  = Contract size × Lots × Price\nRequired margin = Position value ÷ Leverage\n\nEffective leverage = Total open position value ÷ Account equity\n",[35,638,636],{"__ignoreMap":37},[10,640,641],{},"One standard lot of EUR\u002FUSD is 100,000 units. At 1.0850 the position is worth $108,500.",[330,643,644,657],{},[333,645,646],{},[336,647,648,651,654],{},[339,649,650],{},"Account leverage",[339,652,653],{},"Margin frozen",[339,655,656],{},"Cost of a 50-pip adverse move",[349,658,659,670,680],{},[336,660,661,664,667],{},[354,662,663],{},"1:30",[354,665,666],{},"$3,616.67",[354,668,669],{},"$500",[336,671,672,675,678],{},[354,673,674],{},"1:100",[354,676,677],{},"$1,085.00",[354,679,669],{},[336,681,682,685,688],{},[354,683,684],{},"1:500",[354,686,687],{},"$217.00",[354,689,669],{},[10,691,692],{},"The position is identical in all three rows. Leverage moved the margin, never the risk.",[10,694,695],{},"The number that actually describes exposure is effective leverage: the notional value of everything open divided by equity. A trader on a 1:500 account running 0.05 lots on $10,000 sits at 0.54:1 — less exposed than someone who paid cash for the same currency. A trader on a 1:30 account running 2.5 lots on the same $10,000 sits at 27:1, pressed against the ceiling the regulator set. The tier says nothing about either of them; the position size says everything.",[10,697,698,699,703,704,277],{},"Run it on your own instrument with the ",[14,700,702],{"href":701},"\u002Ftools\u002Fleverage-calculator","leverage calculator"," and the ",[14,705,707],{"href":706},"\u002Ftools\u002Fmargin-calculator","margin calculator",[20,709,61],{"id":60},[10,711,712],{},"High leverage does not lose money. It removes the constraint that used to stop you.",[10,714,715],{},"On a 1:30 account, $10,000 of equity caps you at about 2.7 standard lots of EUR\u002FUSD before margin runs out — the broker enforces a position-size ceiling on your behalf. On 1:500 the same $10,000 supports 46 lots. Nothing improved; a ceiling was removed.",[10,717,718,719,723,724,726,727,731],{},"The chain that empties accounts is always the same. Leverage permits a large position, the large position produces a loss too big to sit through, and the resulting drawdown demands a return arithmetic will not supply — ",[14,720,722],{"href":721},"\u002Fguides\u002Fmaximum-drawdown-explained","a 50% loss needs a 100% gain to get back to flat",". Leverage is where the chain starts, but the link that does the damage is size, which is why ",[14,725,80],{"href":79}," is the control worth having and the ",[14,728,730],{"href":729},"\u002Fglossary\u002Fwhat-is-a-margin-call","margin call"," is the symptom rather than the cause.",[20,733,90],{"id":89},[10,735,736],{},"The 10,000+ accounts connected to ShowMyTrades (August 2026) sit across 703 distinct broker servers, on MT4, MT5, cTrader and TradeLocker. Effectively every leverage tier on the market is represented somewhere in that set, from a regulated 1:30 cap to offshore 1:500 and beyond.",[10,738,739,740,743],{},"The outcomes do not sort by tier. Across the public accounts with trading history, the median ",[14,741,742],{"href":107},"deepest drawdown"," is 9.7% — but 38.5% of them never went more than 5% underwater, while 38.2% gave back more than a fifth of their peak and 17.6% more than half of it.",[10,745,746],{},"Two groups of almost identical size, drawn from the same pool of leverage settings, ending an order of magnitude apart. What separates them is not what the broker permitted. These figures describe accounts published on ShowMyTrades, not traders in general, and within that population the variable that moved was size.",[20,748,140],{"id":139},[10,750,751],{},"The leverage the broker granted appears as a badge in the account page header, next to the broker name and the account currency. It is read from the terminal, not typed in by the owner.",[10,753,754,755,758,759,762,763,128,765,771,772,778,779,128,782,785],{},"What the trader did with it shows up elsewhere. ",[50,756,757],{},"Total Lots"," in the advanced statistics is the ",[14,760,761],{"href":275},"cumulative volume actually traded",". ",[50,764,229],{},[50,766,767],{},[14,768,770],{"href":769},"\u002Fglossary\u002Fwhat-is-drawdown-on-balance","DD on Balance"," in the account stats panel show what that volume cost at the worst moment — the first on equity including open positions, the second on closed balance only. The ",[50,773,774],{},[14,775,777],{"href":776},"\u002Fglossary\u002Fwhat-is-an-equity-curve","Equity Curve"," in the charts viewer plots ",[50,780,781],{},"Balance",[50,783,784],{},"Equity"," together, and the gap between the two lines is where an oversized open position hides until it is closed.",[20,787,234],{"id":233},[236,789,790,796,802,808],{},[239,791,792,795],{},[50,793,794],{},"\"1:500 is riskier than 1:30.\""," The account setting is not risk. Two accounts holding identical positions carry identical risk whatever the broker permits. Higher leverage only widens the range of sizes you are allowed to choose badly from.",[239,797,798,801],{},[50,799,800],{},"\"More leverage means more profit.\""," It means less capital tied up as margin. Profit and loss are set by position size and price movement, both unchanged by the tier.",[239,803,804,807],{},[50,805,806],{},"\"Free margin is spare buying power.\""," Free margin is the distance between you and a stop out. Spending it is how a manageable loss becomes a liquidation.",[239,809,810,813],{},[50,811,812],{},"\"My broker caps me at 1:30, so I am safe.\""," A regulatory cap limits maximum total size, not the risk on any single trade. An account can still be lost on one badly sized position well inside a 1:30 limit.",[10,815,816,817,821],{},"Every number above has a calculator behind it — see ",[14,818,820],{"href":819},"\u002Fguides\u002Fforex-calculators-guide","the guide to forex calculators"," for how they fit together.",{"title":37,"searchDepth":279,"depth":279,"links":823},[824,825,826,827,828],{"id":22,"depth":279,"text":23},{"id":60,"depth":279,"text":61},{"id":89,"depth":279,"text":90},{"id":139,"depth":279,"text":140},{"id":233,"depth":279,"text":234},"Leverage is the ratio between position size and the capital backing it. Here is the margin formula, a worked example, and drawdown data from thousands of accounts.",false,{},"\u002Fglossary\u002Fwhat-is-leverage",[834,296,835],"what-is-a-margin-call","what-is-maximum-drawdown",{"title":622,"description":829},"5.glossary\u002Fwhat-is-leverage","Leverage","9fzrPGzcUcu5W9wxB-HAiIpCi3gDQHwpcPzkOAH6NtA",{"id":841,"title":842,"body":843,"category":609,"date":287,"description":1037,"draft":830,"extension":290,"meta":1038,"navigation":289,"path":79,"related":1039,"seo":1041,"stem":1042,"term":1043,"updated":287,"__hash__":1044},"glossary\u002F5.glossary\u002Fwhat-is-position-sizing.md","What Is Position Sizing? Formula and Lot Size Calculation",{"type":7,"value":844,"toc":1030},[845,851,853,856,862,865,871,879,882,902,909,914,916,919,926,928,941,944,957,959,966,992,994,1024],[10,846,847,848,850],{},"Position sizing is the decision of how large a trade to open, derived from how much of the account you are willing to lose if the trade fails. It converts a risk percentage into a lot size using two inputs: the distance to your stop and the value of one pip at that size. It is the single variable that determines an account's ",[14,849,469],{"href":468}," profile, and it is chosen before the trade rather than discovered after it.",[20,852,23],{"id":22},[10,854,855],{},"Three steps, in order.",[28,857,860],{"className":858,"code":859,"language":33},[31],"1. Risk amount   = Account balance × Risk %\n2. Pip value     = Contract size × Pip in quote currency × FX rate to account currency\n3. Position size = Risk amount \u002F (Stop distance in pips × Pip value per lot)\n",[35,861,859],{"__ignoreMap":37},[10,863,864],{},"A worked example on a $10,000 account risking 1% per trade, with a 50-pip stop on EUR\u002FUSD, where one standard lot moves $10 per pip:",[28,866,869],{"className":867,"code":868,"language":33},[31],"Risk amount   = 10,000 × 0.01      = $100\nPosition size = 100 \u002F (50 × 10)    = 0.20 lots\n",[35,870,868],{"__ignoreMap":37},[10,872,873,874,878],{},"Widen the stop to 100 pips and the same $100 of risk buys 0.10 lots. The risk stays constant; the size adapts. That inversion is the whole idea, and it is why sizing and ",[14,875,877],{"href":876},"\u002Fglossary\u002Fwhat-is-a-stop-loss","stop-loss"," placement cannot be decided separately.",[10,880,881],{},"Three methods dominate in practice:",[236,883,884,890,896],{},[239,885,886,889],{},[50,887,888],{},"Fixed lot."," Always 0.10 lots, whatever the stop or the balance. Simple, and the risk per trade drifts constantly as both change.",[239,891,892,895],{},[50,893,894],{},"Percentage risk (fixed fractional)."," The formula above. Risk stays proportional, so losses shrink in currency terms as the account falls — the mechanism that makes recovery arithmetically possible.",[239,897,898,901],{},[50,899,900],{},"Martingale progression."," Size increases after a loss to recover it. Wins are frequent and small, the equity curve looks immaculate, and the distribution of outcomes has a fat left tail that arrives all at once.",[10,903,904],{},[905,906],"img",{"alt":907,"src":908},"Doubling the lot size after every loss against a fixed fraction of equity: same win rate, same market, opposite outcomes","\u002Fimages\u002Farticles\u002Flot-progression.svg",[10,910,911],{},[149,912,913],{},"Which one an account uses is readable from the lot sizes alone.",[20,915,61],{"id":60},[10,917,918],{},"Entries decide whether you win. Sizing decides whether you are still there for the next one. Two traders taking identical signals with identical stops produce identical win rates and completely different accounts, because one risked 0.5% and the other risked 8%.",[10,920,921,922,925],{},"Sizing is also where ",[14,923,924],{"href":832},"leverage"," does its actual damage. High leverage is not itself risk — it is permission to take risk. The risk arrives when that permission is used to open a size whose stop distance implies a loss the account cannot absorb twice in a row.",[20,927,90],{"id":89},[10,929,930,931,933,934,937,938,940],{},"Sizing leaves its signature in the drawdown tail. Across the accounts published on ShowMyTrades that have trading history (August 2026) — accounts published here, not traders in general — ",[50,932,116],{}," have been ",[14,935,936],{"href":107},"more than 20% underwater"," at some point and ",[50,939,120],{}," have lost more than half their peak value.",[10,942,943],{},"A properly sized fixed-fractional account rarely reaches that last band. Losing 50% at 1% risk per trade requires roughly 69 consecutive losses. Accounts in that tail generally arrived another way: escalating size after losses, or a size chosen without reference to the stop at all.",[10,945,946,947,132,949,952,953,956],{},"Context for who is doing the sizing: the median autotrading share on these accounts is ",[50,948,485],{},[50,950,951],{},"53.9%"," run above 90% automated, against ",[50,954,955],{},"42.2%"," under 10%. On more than half of the published set, position size is a line in an EA's settings — configured once and never revisited as the balance moves.",[20,958,140],{"id":139},[10,960,143,961,965],{},[14,962,964],{"href":963},"\u002Ftools\u002Fposition-size-calculator","position size calculator"," runs the formula above with live prices, in your account currency, for percentage or fixed-amount risk and for stops expressed in price or pips.",[10,967,968,969,971,972,975,976,978,979,982,983,987,988,991],{},"On a published account page you can audit sizing rather than assume it. The ",[50,970,205],{}," carries a ",[50,973,974],{},"Volume"," column showing the lot size of every individual trade, so a size that steps up after each loser is visible directly. ",[50,977,213],{}," adds a ",[50,980,981],{},"Lot Size"," min\u002Fmax filter: set a floor above the account's normal size and see whether the surviving trades cluster immediately after losses, which is the martingale signature. ",[50,984,985],{},[14,986,757],{"href":275}," in the ",[50,989,990],{},"Advanced Statistics"," module gives the aggregate; across published accounts it stands at 1,724,575 lots traded.",[20,993,234],{"id":233},[236,995,996,1002,1012,1018],{},[239,997,998,1001],{},[50,999,1000],{},"\"Risking 2% means using 2% of my account.\""," No. 2% is the loss if the stop is hit. The margin the position occupies is a separate figure entirely, set by leverage.",[239,1003,1004,1007,1008,1011],{},[50,1005,1006],{},"\"I risk 1% per trade, so my worst case is 1%.\""," Only with one position open. ",[14,1009,1010],{"href":16},"Five correlated positions"," at 1% each are one 5% trade wearing a disguise, and correlated pairs move together precisely when it hurts.",[239,1013,1014,1017],{},[50,1015,1016],{},"\"No stop loss, so no risk to calculate.\""," Without a stop, the position size formula has no denominator — the risk is not small, it is undefined, and its true value is the margin call.",[239,1019,1020,1023],{},[50,1021,1022],{},"\"Compounding means scaling up.\""," Fixed-fractional sizing scales both ways. Increasing lots after wins while holding them constant after losses is not compounding; it is a slow ratchet toward a drawdown you never sized for.",[10,1025,1026,1027,277],{},"For the full set of risk and sizing tools and when each one applies, see ",[14,1028,1029],{"href":819},"the forex calculators guide",{"title":37,"searchDepth":279,"depth":279,"links":1031},[1032,1033,1034,1035,1036],{"id":22,"depth":279,"text":23},{"id":60,"depth":279,"text":61},{"id":89,"depth":279,"text":90},{"id":139,"depth":279,"text":140},{"id":233,"depth":279,"text":234},"Position sizing turns a risk percentage into a lot size using your stop distance and pip value. The formula, the three common methods, and what bad sizing costs.",{},[614,835,1040,297],"what-is-a-stop-loss",{"title":842,"description":1037},"5.glossary\u002Fwhat-is-position-sizing","Position Sizing","qP5mfGAxSuWSiccKuy0i_N8LQtpN2UHwOG-ZOVxOViU",{"id":1046,"title":1047,"body":1048,"category":1249,"date":287,"description":1250,"draft":289,"extension":290,"meta":1251,"navigation":289,"path":84,"related":1252,"seo":1253,"stem":1254,"term":1255,"updated":287,"__hash__":1256},"glossary\u002F5.glossary\u002Fwhat-is-volatility.md","What Is Volatility? How It Is Measured in Trading",{"type":7,"value":1049,"toc":1242},[1050,1053,1055,1058,1064,1067,1074,1076,1082,1088,1091,1093,1100,1116,1131,1133,1160,1180,1202,1204,1236],[10,1051,1052],{},"Volatility is the dispersion of returns around their own average — how far individual results scatter from the mean, not which direction they point. It is measured with standard deviation, and it is symmetrical: a strategy that occasionally gains 8% in a day is exactly as volatile as one that occasionally loses 8%. Volatility is therefore not risk. It is the multiplier that turns a given position size into a given amount of risk.",[20,1054,23],{"id":22},[10,1056,1057],{},"Take the series of returns — per day, per month, or per trade — find the mean, and measure the typical distance from it.",[28,1059,1062],{"className":1060,"code":1061,"language":33},[31],"σ = √( Σ (rᵢ − r̄)² \u002F (n − 1) )\n\nrᵢ = return of period i\nr̄  = mean return across all n periods\nn  = number of periods\n",[35,1063,1061],{"__ignoreMap":37},[10,1065,1066],{},"Standard deviation comes out in the same units as the inputs: percent if you fed it percentages, account currency if you fed it per-trade profit and loss. To compare across timeframes it is scaled by the square root of time, which is why an annualised figure from daily data is multiplied by √252, the number of trading days in a year.",[10,1068,1069,1070,1073],{},"Two properties matter in practice. Volatility is ",[50,1071,1072],{},"not constant"," — it clusters, so quiet weeks are followed by quiet weeks and violent days arrive in groups. And it is the denominator of every risk-adjusted metric: the Sharpe ratio family divides return by exactly this number, which is how two strategies with the same gain end up rated very differently.",[20,1075,61],{"id":60},[10,1077,1078,1079,1081],{},"Position size is meaningless without it. One lot of a pair moving 40 pips a day and one lot of a pair moving 140 pips a day are two completely different bets wearing the same label. Sizing by lots rather than by expected movement is the single most common way an account's risk profile drifts without the trader deciding anything, and it is why ",[14,1080,80],{"href":79}," rules are written in currency risked rather than in lots.",[10,1083,1084,1085,1087],{},"Volatility is also what converts into ",[14,1086,469],{"href":468},". Depth of decline is roughly volatility multiplied by exposure multiplied by time spent wrong. Halve the volatility of the instruments you trade and, at constant size, you halve the drawdown you have to survive — and the return along with it.",[10,1089,1090],{},"Finally, it changes underneath you. A strategy sized correctly in a calm quarter is oversized when volatility doubles, and it does not need to make a single new decision to become dangerous. Stops widen, spreads widen, and the same lot size now risks twice what it was authorised to risk.",[20,1092,90],{"id":89},[10,1094,1095,1096,1099],{},"Across the public accounts on ShowMyTrades with trading history (August 2026), the median ",[50,1097,1098],{},"Sharpe Ratio is 0.05",". That is a return barely distinguishable from the noise around it: the middle account's average result per period is tiny compared with the dispersion of those periods.",[10,1101,1102,1103,1106,1107,156,1109,1111,1112,1115],{},"The rest of the distribution reads the same way: median time-weighted return ",[50,1104,1105],{},"+3.2%",", median deepest drawdown ",[50,1108,112],{},[50,1110,100],{}," at a median length of ",[50,1113,1114],{},"2.4 hours",". Small edge, risk absorbed several times larger than the result produced.",[10,1117,1118,1119,1122,1123,1126,1127,1130],{},"Dispersion also explains the gap between how often these accounts win and what they end up with. The median win rate is ",[50,1120,1121],{},"68.8%"," and the median profit factor ",[50,1124,1125],{},"1.28",": most trades close green, and the minority that do not are large enough to consume most of the gain. ",[50,1128,1129],{},"63.0%"," of accounts are positive over time — a majority, by a margin much thinner than the scatter of the results behind it.",[20,1132,140],{"id":139},[10,1134,1135,1136,1138,1139,1142,1143,128,1149,1152,1153,1159],{},"In ",[50,1137,990],{},", the ",[149,1140,1141],{},"Performance Metrics"," section shows ",[50,1144,1145],{},[14,1146,1148],{"href":1147},"\u002Fglossary\u002Fwhat-is-standard-deviation-in-trading","Standard Deviation",[50,1150,1151],{},"Sharpe Ratio"," one under the other. Standard Deviation there is printed in the account currency and measures the spread of individual trade results: a large figure next to a small ",[50,1154,1155],{},[14,1156,1158],{"href":1157},"\u002Fglossary\u002Fwhat-is-expectancy","Expectancy"," is a strategy whose outcome depends heavily on which trades happen to land in the sample.",[10,1161,143,1162,1165,1166,128,1169,1172,1173,1179],{},[50,1163,1164],{},"Account Stats"," panel carries ",[50,1167,1168],{},"Avg Daily %",[50,1170,1171],{},"Avg Monthly %"," on the two rows below Gain and Abs. Gain. Those are averages, so read them against the ",[50,1174,1175],{},[14,1176,1178],{"href":1177},"\u002Fguides\u002Fmonthly-returns-table-explained","Monthly Returns"," table, where the month-to-month scatter is visible directly: two accounts with the same average monthly percentage can have wildly different rows.",[10,1181,143,1182,1184,1185,1188,1189,1191,1192,1194,1195,128,1198,1201],{},[50,1183,225],{}," is one panel that switches views: ",[149,1186,1187],{},"Growth by Trade"," makes clustering obvious, ",[149,1190,229],{}," shows what the dispersion cost. ",[50,1193,990],{}," adds ",[149,1196,1197],{},"Weekday",[149,1199,1200],{},"Hourly"," views, which show when results concentrate — usually when volatility does.",[20,1203,234],{"id":233},[236,1205,1206,1212,1218,1224],{},[239,1207,1208,1211],{},[50,1209,1210],{},"\"Volatility is risk.\""," Risk is the chance of a loss you cannot survive. Volatility is dispersion in both directions and says nothing about your capital base.",[239,1213,1214,1217],{},[50,1215,1216],{},"\"Low volatility means safe.\""," Strategies that sell tails — grids, martingales, unhedged carry — read as low volatility right up to the event they were built to lose to.",[239,1219,1220,1223],{},[50,1221,1222],{},"\"High Sharpe means a better trader.\""," It means better return per unit of dispersion, over the sample measured. With 171 trades the estimate is noisy.",[239,1225,1226,1229,1230,1233,1234,277],{},[50,1227,1228],{},"\"Volatility is a property of the instrument.\""," It is a property of the instrument ",[149,1231,1232],{},"and"," the period. The same pair changes regime several times a year, and pairs that share a currency change together — see ",[14,1235,318],{"href":292},[10,1237,1238,1239,277],{},"Volatility only matters once it becomes a real loss, and how that reads is covered in ",[14,1240,1241],{"href":721},"maximum drawdown explained",{"title":37,"searchDepth":279,"depth":279,"links":1243},[1244,1245,1246,1247,1248],{"id":22,"depth":279,"text":23},{"id":60,"depth":279,"text":61},{"id":89,"depth":279,"text":90},{"id":139,"depth":279,"text":140},{"id":233,"depth":279,"text":234},"Metrics","Volatility is the dispersion of returns around their average, measured with standard deviation. It is not risk by itself, but it decides what a lot size means.",{},[614,296,835,613],{"title":1047,"description":1250},"5.glossary\u002Fwhat-is-volatility","Volatility","Bayb0Tk2swP7kUxrPVVIleTDEsNs63g6l6-gKxo5cjE",1787415695791]