Back to calculator
GUIDE • FUNDAMENTALS

What is position sizing?

Position sizing is the process of deciding how big your trade should be before you enter. It is not about confidence, predictions, or how strong a setup looks. It is simply the trade size (lots or units) that keeps your risk controlled if the trade goes wrong.

Most trading accounts do not fail because of one terrible trade. They fail because of a series of normal losses combined with oversized positions. Even a strong strategy can hit a losing streak. Position sizing is what gives your edge time to play out without a single trade (or a short run of trades) taking you out of the game.

Done well, position sizing creates consistency. When every trade risks the same fraction of your account, you stop having one oversized position decide your entire week. You also avoid the opposite problem: trading so small that results feel random and motivation collapses.

Position sizing also forces clarity. To size a trade responsibly, you must define where the idea is invalid, meaning you need a stop loss. If you cannot define the stop, you cannot define the risk. And if you cannot define the risk, you are not position sizing, you are guessing.

SECTION 01

Why it matters

Lower risk of ruin

Smaller, consistent risk per trade makes it harder for a normal losing streak to do permanent damage.

More stable performance

A good month is built from many small decisions, not one oversized gamble.

Cleaner decision making

You size the trade from your stop loss, not from emotion.

SECTION 02

How this calculator works

The calculator follows a simple idea: define the money you are willing to lose on the trade, then solve for the position size that matches that risk if the stop loss is hit.

Step 1 — Risk Amount

Account Balance × Risk % = the maximum you are willing to lose on this trade.

Step 2 — Pip Value

Convert your stop loss distance into money using the instrument's pip value. If the instrument is quoted in a different currency than your account, the pip value is converted into your deposit currency first.

Step 3 — Position Size

Position Size (lots) = Risk Amount ÷ (Stop Loss in pips × Pip Value per 1.00 lot)

SECTION 03

Worked examples

Example 1 — EURUSD

Account: $5,000 · Risk: 1% ($50) · Stop: 30 pips. For EURUSD, pip value ≈ $10 per pip per lot. Risk per lot with 30-pip stop = 30 × $10 = $300. Position size = $50 ÷ $300 = 0.17 lots (rounded).

Example 2 — GBPJPY

Account: $5,000 · Risk: 1% ($50) · Stop: 30 pips · USDJPY: 150. Pip value per lot in USD ≈ 1,000 ÷ 150 = $6.67. Risk per lot = 30 × $6.67 = $200.10. Position size ≈ $50 ÷ $200.10 ≈ 0.25 lots.

SECTION 04

Metals — lots vs. ounces

Metals can look confusing because the word lot does not mean 100,000 units like FX. For metals, a lot is usually defined in ounces.

XAUUSD (Gold)

1.00 lot = 100 troy ounces. 0.10 lot = 10 oz, 0.01 lot = 1 oz.

XAGUSD (Silver)

1.00 lot = 5,000 troy ounces. 0.10 lot = 500 oz, 0.01 lot = 50 oz.

Stop loss on gold

Many platforms quote gold to 2 decimals (1 pip = $0.01). A 20-pip stop is a $0.20 move. A $2.00 stop would be 200 pips. If your platform shows open and stop price, the stop distance is simply the price difference.

SECTION 05

Common mistakes to avoid

Mixing pip and price stops

Some tools take a stop loss in pips, others take an open price and stop price. Make sure you are comparing the same stop distance.

JPY pip convention

JPY pairs use a pip size of 0.01, not 0.0001. A 30-pip stop on GBPJPY is a 0.30 move in price.

Contract size differences

Some brokers use gold contracts of 100 oz per lot, others use 10 oz or 1 oz. The same lot size can represent a different exposure depending on the broker.

Deposit currency conversion

A pip value can change when your account currency changes. The trade might look larger or smaller only because of currency conversion.

Confusing micro, mini, and standard lots

In FX, 1.00 standard lot is 100,000 units, 0.10 is a mini lot, 0.01 is a micro lot. Metals and indices follow different contract definitions.

Tip: If a result looks too big or too small, check only two things first: (1) contract size, and (2) what the tool means by pip or tick.
SECTION 06

Mini FAQ

Does this work for indices or commodities?

The logic works for any instrument if you know the tick or pip size and the contract specification (what 1 lot represents). Some brokers define metals, indices, and crypto contracts differently, so always sanity-check contract size.

Can I use this with prop firm rules?

Yes. Prop rules are usually based on daily drawdown and maximum loss. Position sizing helps you translate those limits into a consistent per-trade risk.

What risk % do most traders use?

There is no universal best number. Many traders operate somewhere between 0.25% and 2% depending on strategy, volatility, and objectives. Focus on survivability first: smaller risk generally reduces drawdowns and makes losing streaks easier to tolerate.