A useful formula

It's not something new. Just that I needed to find an easy way to find out how much I can trade out of my margin. I know unless one is an expert at spotting trend reversals, one can never be sure how many pips sometimes the trend can go against you before it goes your way. So using 100% of the 1:100 margin to trade is not an option.

In any case, I came up with a simple formula.

Given x is the amount in the account (i.e. your own cash)
therefore the margin is 100x, and
given y to be the amount traded (using the 1:100 leverage)

Then,

One's pip loss (risk) tolerance = [(10,000x)/y] -100

In the case of having 1000 in the account, and therefore can trade up to 100,000, and using 20% = 20,000 to trade,

Then the maximum pips can lose before a margin call = [(10,000 X 1000)/2,0000] - 100
= 500 - 100
= 400

This trader, under such circumstances can lose up to 400 pips before he is forced by the platform to close his losing position instead of waiting for the trend to reverse.

In other words, this simple equation allows you, my dear readers, to calculate how much of your margin you can trade given your risk appetite or what you believe is the appropriate pips you might lose.

As for it's application for me, since I use a recurrent opening of positions if the trend is against me...I'll have to do a few more sums before I can fully use this model.