Short YouTube clip (Adrian Reid) advising traders to manually follow currency conversion calculations through to their account base currency to ensure position sizes and risk percentages are correct. Uses an example of an Australian base currency holding a US dollar position that could unintentionally exceed intended risk if conversions are done incorrectly.
The key lesson is to make sure that you follow the calculations all the way through yourself manually, so you understand what the conversion should be, and make sure that your position size is appropriate relative to your base currency account. So, for example, you can get yourself into trouble. Let's say my base currency was Australia, and I have a system on the US If I don't set it up right, I might end up taking a 5% US dollar position, which ends up being more than 5% in Australia. And so my risk is too high. So you've got to make sure you just follow the calculation all the way through and then compare back to your base currency and make sure your risk is set at the right level. So if you do the currency conversion the wrong way, for instance, or you then you can end up with too much risk, which some people have done in the past. It.
