Most blown accounts are not caused by bad entries. They are caused by the wrong lot size: one trade that risks 10% of the account instead of 1%. Position sizing is the one part of trading you fully control, and it takes about ten seconds once you know the formula.
- Lot size is calculated from the money you are willing to lose, not from the position you would like to hold.
- The formula is Lots = Risk $ ÷ (Stop-loss in pips × Pip value per lot).
- Pip value is fixed at $10 per lot only for pairs quoted in USD on a USD account; other pairs need conversion.
- On gold, a $1 move equals $100 per standard 100-oz lot.
- Fixed risk of 0.5–2% per trade keeps normal losing streaks survivable.
What a lot actually is
A lot is the trade volume. On forex, 1 standard lot = 100,000 units of the base currency, 0.1 is a mini lot (10,000) and 0.01 is a micro lot (1,000). On gold (XAUUSD) most brokers define 1 lot as 100 troy ounces. The lot size does not tell you the risk on its own — risk only appears when you combine it with the distance to your stop-loss.
| Lot | Units (forex) | Pip value EURUSD |
|---|---|---|
| 1.00 | 100,000 | $10.00 |
| 0.10 | 10,000 | $1.00 |
| 0.01 | 1,000 | $0.10 |
The lot size formula
Start from the money you are willing to lose, not from the lot you would like to trade. Then divide that amount by what one lot would lose if the stop-loss is hit.
Lots = Risk $ ÷ (Stop-loss in pips × Pip value per 1 lot)
The only number that changes between instruments is the pip value per lot. For pairs where USD is the quote currency (EURUSD, GBPUSD, AUDUSD) it is fixed at $10 per standard lot on a USD account. For other pairs it depends on the current exchange rate — which is why a calculator that uses live rates saves mistakes.
Three worked examples
1. EURUSD, 1% risk
Balance $5,000, risk 1%, stop-loss 25 pips. Risk = $50. Loss per 1 lot = 25 × $10 = $250. Lots = 50 ÷ 250 = 0.20 lots.
2. USDJPY, 1% risk
Same $5,000 account and 25-pip stop. For USDJPY one pip per standard lot equals 1,000 JPY. At a rate of 150.00 that is 1,000 ÷ 150 ≈ $6.67. Loss per lot = 25 × 6.67 = $166.7, so lots = 50 ÷ 166.7 ≈ 0.30 lots. Same risk, bigger position — because each pip is worth less.
3. Gold XAUUSD, 1% risk
With 1 lot = 100 oz, every $1 move in the gold price is $100 per lot. A stop-loss $5 away from entry (for example 2650.00 → 2645.00) costs $500 per lot. Risk $50 ÷ $500 = 0.10 lots. Gold moves fast, so stops in dollars are usually wider than they look in "pips" — see our XAUUSD pip value guide.
⚙Calculate it instantly with live ratesFree Position Size calculator — forex, gold, indices→How much should you risk per trade?
There is no single right number, but professional traders and prop firms cluster around 0.5–2% per trade. The reason is the maths of losing streaks: even a good strategy with a 55% win rate will regularly produce 6–8 losses in a row.
| Risk per trade | After 8 losses | Gain needed to recover |
|---|---|---|
| 0.5% | −3.9% | +4.1% |
| 1% | −7.7% | +8.4% |
| 2% | −14.9% | +17.5% |
| 5% | −33.7% | +50.7% |
| 10% | −57.0% | +132.3% |
At 1% a bad week is an inconvenience. At 10% it ends the account. That asymmetry — the bigger the drawdown, the larger the gain needed to get back — is the whole argument for small, fixed risk.
Choose your risk % once, write it down and keep it fixed for at least 50 trades. Change the stop-loss distance per setup, never the money at risk.
Pip value for other pairs and account currencies
When USD is not the quote currency, one pip is worth 10 units of the quote currency per standard lot, and that amount has to be converted into your account currency at the current rate.
USDCAD at 1.3800: 10 CAD ÷ 1.38 ≈ $7.25 per lot
| Pair | Example rate | Pip value / 1 lot (USD account) |
|---|---|---|
| EURUSD, GBPUSD, AUDUSD | — | $10.00 |
| USDJPY | 150.00 | ≈ $6.67 |
| GBPJPY | USDJPY 150.00 | ≈ $6.67 |
| USDCAD | 1.3800 | ≈ $7.25 |
| USDCHF | 0.8800 | ≈ $11.36 |
| EURGBP | GBPUSD 1.2700 | ≈ $12.70 |
The rates in the table are examples only — pip values move every second with the market. On a EUR or GBP account the same logic applies: a EURUSD pip is $10 per lot, which at EURUSD 1.08 is about €9.26. Traders with non-USD accounts who assume "$10 per pip" systematically over- or under-size every trade.
Pre-trade position sizing checklist
- Write down the entry and the stop-loss level from your setup — the chart decides the stop, not the lot.
- Measure the distance in pips (or in dollars of price for gold and indices).
- Calculate the risk in money: balance × risk %. On a prop account use the smaller of your risk % and the remaining daily room.
- Find the pip value per lot for this symbol and your account currency.
- Divide, then round down to the broker's lot step (usually 0.01).
- Add the cost of spread and commission and check the trade still makes sense.
- Check total open risk: the new trade plus any positions already open.
Several positions and partial entries
If you split one idea into two or three entries — for example half at market and half on a pullback — the combined risk of all parts must equal your planned risk. With a $50 budget, two entries each sized for $25 to the same stop-loss is correct; two entries each sized for $50 doubles the risk. The same applies to correlated trades: long EURUSD and long GBPUSD at 1% each is closer to one 2% bet on a weaker dollar than to two independent trades.
Indices, metals and crypto CFDs
Contract sizes for indices and crypto differ between brokers — one lot of an index CFD might be 1, 10 or 100 units of the index. The formula stays the same; only the "value per 1 point per lot" changes. Always read Symbol → Specification in MetaTrader before trading a new instrument, and test the calculation with the minimum lot first.
Common position sizing mistakes
- Fixed lot for every trade. 0.10 lots with a 10-pip stop and with a 60-pip stop are completely different risks.
- Ignoring the account currency. On a EUR or GBP account the pip value must be converted from USD.
- Forgetting spread and commission. On scalps with 5–10 pip stops, a 1-pip spread is 10–20% of the risk.
- Rounding up. If the formula says 0.27, trade 0.27 or round down to 0.25 — never up to 0.30.
- Adding to losers. Averaging down multiplies the original risk; it is the start of a martingale.
Summary
Decide the risk in money first, measure the stop in pips, look up the pip value, divide. Do it before every trade — or let a calculator or a trade panel do it for you — and the single biggest cause of account blow-ups disappears.
Frequently asked questions
Educational content only, not financial advice. Leveraged trading carries a high risk of loss. Past performance does not guarantee future results. Broker and prop-firm rules change — always check the current conditions of your provider.
