Position sizing
Also called: Position size, Lot size, Trade size, Lot size calculation, Pozisyon büyüklüğü, Lot hesaplama
Position sizing is choosing how many lots or shares to trade; you get it by dividing the amount you are willing to risk by the stop distance.
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Calculate: Position size calculatorWhat is position sizing?
Position size is how big you go into a trade: lots in forex, shares in stocks, units in crypto. Two people can take the same chart, the same entry and the same stop. When the stop hits, one loses 1 percent of the account and the other 10 percent. The only difference is size.
The right size comes from three numbers: your account, the share of it you decide to risk per trade, and the stop distance. The stop goes on the chart first, by structure. Then the size is set so that if the stop hits, you lose exactly the amount you chose beforehand.
The order is the whole point. You do not pick the stop to fit the size; you pick the size to fit the stop. How strongly you believe in the trade appears nowhere in this calculation. Conviction is not something the chart tells you, and it does not change the stop distance.
How to calculate lot size
The formula is short: size equals the risk amount divided by the stop distance times the value per unit. In forex the unit is a pip and the value is pip value per lot. With a dollar account and a pair quoted in dollars, like EUR/USD, one pip on a standard lot is worth 10 dollars.
Example: a 5,000 dollar account risking 1 percent per trade, so 50 dollars. The stop is 40 pips away. 50 / (40 × 10) = 0.125 lots. Platforms usually step in 0.01 lots, so you round to 0.12. Round down, because rounding up means risking more than you planned.
Same account, same 1 percent, but now the stop is 80 pips. The size halves to 0.06 lots, and the loss if stopped is still about 50 dollars. In a wide range the stop lands far away, but that does not make the trade riskier. It only makes the size smaller.
Stocks work the same way. On a 20,000 account, 1 percent is 200. Buying at 64.00 with a stop at 61.50 risks 2.50 per share, so 200 / 2.50 = 80 shares. To allow for commission and spread, take a few fewer.
Try it on a chart
This chart shows a wide range with price down at its lower edge. Measure beyond which low your stop would go if you entered and how far away the target is. Then work out how many lots that stop distance gives at 1 percent of your account.
Your turn: read the chart and make your call.
No sign-up needed. Take a guess; when the chart opens, you'll see why.
The most common sizing mistake
Sizing by conviction. Tripling the lot because the setup looks so clean means risking 3 percent of the account on that trade. Clean-looking setups get stopped out too, and on the day they do, they get stopped out at your biggest size.
Second, sizing up after losses. Raising the lot to win back two losses in one trade grows the risk at the worst possible moment. Size is calculated from what the account is worth now; if the account shrank, so does the lot.
Third, a fixed lot. Trading 0.10 lots every time is easy, but you lose 20 dollars when the stop is 20 pips and 90 dollars when it is 90. Risk swings four or five times from trade to trade, and it gets hard to understand why your results look the way they do.
What the calculation cannot see
The formula assumes the stop fills at your price. On news or across a weekend gap it can slip, and the real loss can exceed 1R. Cutting size before major data releases partly covers that gap.
Correlated positions break the math too. Long EUR/USD and long GBP/USD at the same time is not two separate 1 percent risks. The two pairs often move together, so you are frequently carrying something closer to 2 percent in one direction.
Pip value is not 10 dollars on every pair. On pairs not quoted in dollars, such as USD/JPY, it changes with the exchange rate. Use the value your platform shows at the time.
Finally, a wide stop on a small account sometimes cannot be sized. On a 500 dollar account, 1 percent is 5 dollars. With an 80 pip stop that works out to 0.006 lots, and even the minimum step of 0.01 nearly doubles the risk. The right answer there is not to force the size but to skip the trade.
Frequently asked questions
How do I calculate lot size?
Place the stop by structure first and measure the distance from entry in pips. Then work out the risk amount: account size times risk percent per trade. Lot size is the risk amount divided by stop distance times pip value per lot. For 50 dollars of risk and a 25 pip stop on EUR/USD, that is 50 / (25 × 10) = 0.2 lots.
What percentage should I risk per trade?
There is no single right number. Many sources talk about small figures, somewhere around 1 to 2 percent. When choosing, think about how many losses in a row you can stand. At 1 percent, ten straight losses shrink the account by about 9.6 percent. At 5 percent, the same run takes about 40 percent. Runs like that happen even with a sound method.
Is position size the same as leverage?
No. Position size is how big your trade is, and that is what sets your risk. Leverage is what your broker allows so you can open that size. On a 0.12 lot trade, the loss when the stop hits is the same whether the account's leverage is 1:30 or 1:500. Leverage only changes the upper limit on how big you can go.
