Are you making the LotRiskReductor mistake? When it comes to FAP Turbo settings one of the most well known is the LotRiskReductor setting used by FAP Turbo for auto money management. It turns out the LotRiskReductor setting is also one of the most misunderstood settings.

FAP Turbo’s auto money management feature uses a setting called the LotRiskReductor (LRR) to determine the number of lots to open a trade with. Unfortunately the manual is a little misleading on the meaning of this setting. The FAP Turbo manual indicates that the LotRiskReductor is a percentage of your available margin being risked on the trade. This is NOT TRUE!

The LotRiskReductor specifies the percentage of your available margin to use when opening a trade. The amount you use and the amount you risk are NOT the same.

Example: If your free margin is $5,000 and your LotRiskReductor = 5 then FA Turbo will purchase as many lots as it can with 5% of $5,000.

Here is the actual formula used by the LotRiskReductor (LRR)  setting to determine the position size (in lots) FAP Turbo will take based on your LRR setting

Position Size = (Free_Margin X LRR) / (1_Lot_Margin X Leverage)

IMPORTAN: LotRiskReductor Is Not Your Risk Percentage

The way FAP Turbo calculates your position size based on the LotRiskReductor says nothing about the risk to your account for this trade. To determine the risk you need to take into account the value of a PIP as well as the where you’ve set your stop loss for the trade. So if you set your LotRiskReductor setting to 5 and notice the actual risk on that trade is actually higher than 5% now you know why.

For a complete description of the very common LotRiskReductor mistake and how it can impact your risk management see Understanding the LotRiskRedcutor Setting.

And for a discussion on how to properly calculate your LotRiskReductor FAP Turbo setting see Scalper Auto Money Management.

Rob Casey