This article was born as a result of two years of technical support of commercial Expert Advisors and answering to user’s questions. I can tell you that few issues cause so many questions, confusion and misunderstanding as setting up the correct Money Management in the EA.
Talking more specifically, the problem is: how to set up the starting lot size for an Expert Advisor, depending on the deposit size and the account type? This task is complicated by the fact that different brokers may have dollar accounts and cent accounts, and the value of one lot may be also different. In this article, we will try to figure out what types of accounts exist in broker companies and how not to get confused in the calculation of the starting lot size.
Let’s start with the concept of the base currency. All transactions on your account are expressed in units of the base currency (profits, losses, etc.). The base currency can be USD, USD cent, EUR, EUR cent, and so on — rubles, rupees, tugriks and so on. As a rule, the base currency is easy to grasp and it doesn’t create any problems. If you refilled your account with 1000$ and you see 1000$ on the account balance, it means that the base currency is USD. If you see the account balance of 100,000, this means the base currency is USD cent. So far, everything is simple, isn’t it?
The second important concept: the size of one lot in the base currency units. Attention: Here starts the confusion! Often, under the “lot size” people mean the numbers you type in when creating a trading order in your terminal, for example: 0.1, 0.01, or 10.0. In fact, these numbers mean the volume of your order in units of broker’s lot. And because the size of different broker’s lots may be different, the same number, for example 0.1, might mean different amount of money for different brokers.
Most brokers use the standard lot size: 1 lot = 100,000 units of the base currency. In other words, if you have a dollar account, 1 lot is equal to 100,000$, and if you have a cent account, 1 lot is equal to 100,000 cents. But there are some brokers that use a 10 or even 100 times smaller lot size. For example, XMarket uses 1 lot = 1,000$ on micro account. Thus, although XMarket micro account has USD as the base currency, a trading order with 0.1 lot will be equivalent to an order with 0.1 lot on the standard cent account. How not to get lost in all these lots? Very simple: just count the cost of 1 point!