Calculate the right lot size in 30 seconds
Fix your risk per trade (1–2%), reverse-calculate from stop distance, and stop guessing.
Why Position Sizing Matters More Than Your Strategy
The Harsh Reality
Many traders lose money, not because they can't predict direction, but because they don't control risk per trade. Even winning traders can blow their accounts with poor position sizing.
Position sizing isn't about "being right or wrong", it's the skill that protects your account when you're wrong. Traders with identical win rates and strategies can have vastly different outcomes based solely on how they size their positions.
Important: This content is for educational purposes. Real trading involves the risk of financial loss. Contract sizes vary by instrument and account type. Always verify final specifications with your MT4/MT5 platform before trading.
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The Core Position Sizing Formula
The Only Formula You Need to Remember
- Risk Amount: Account Balance × Risk % (e.g., $10,000 × 2% = $200)
- Stop Distance: Pips from entry to stop loss
- Pip Value: How much 1 pip movement equals in your account currency for 1 lot
Understanding Pip Values (The Missing Piece Most Guides Skip)
Scenario A: JPY Account Trading USD/JPY (Simplest Case)
Assumptions: 1 lot = 100,000 units (standard), USD/JPY pip = 0.01 yen
Pip Value (1 standard lot) = ¥1,000 per pip; convert to your account currency using the current USDJPY rate.
For USD/JPY: "1 standard lot moves ¥1,000 per pip" (convert using current exchange rate).
Scenario B: USD Account Trading EUR/USD (Cross-Currency)
First calculate in USD, then convert if needed.
- • EUR/USD pip = 0.0001
- • 1 lot (100,000) = 1 pip = $10 USD
- • If account is USD: Pip value = $10 (no conversion needed)
Note: Exact contract specifications and minimum lot sizes vary by broker and account type. Always verify with your MT4/MT5 platform.
Step-by-Step Calculation (EUR/USD Example)
Example 1: Conservative EUR/USD Trade
Trade Setup
- Account Balance: $10,000
- Risk Tolerance: 2% ($200)
- Currency Pair: EUR/USD
- Entry Price: 1.1200
- Stop Loss: 1.1150
- Risk in Pips: 50 pips
Calculation
Result: Trade 0.04 lots (4,000 units) to risk exactly $200
Example 2: Aggressive GBP/JPY Trade
Trade Setup
- Account Balance: $25,000
- Risk Tolerance: 3% ($750)
- Currency Pair: GBP/JPY
- Entry Price: 185.50
- Stop Loss: 184.00
- Risk in Pips: 150 pips
Calculation
Result: Trade 0.05 lots (5,000 units) to risk exactly $750
Master Position Sizing? Start Trading Live
Apply proper position sizing with real market conditions. Start with just $50 minimum deposit.
30-Second Pre-Trade Checklist (Do This Every Time)
- ✓Risk percentage is 1-2% (never "what feels right")
- ✓Stop loss is based on technical levels, not arbitrary distance
- ✓Lot size calculated from stop distance, not "gut feeling"
- ✓Total portfolio risk under 6-8% if holding multiple positions
Common Mistakes (The Patterns Behind Most Blown Accounts)
Account Killers
- • Using tight stops with oversized positions (death by a thousand cuts)
- • Increasing position size because "leverage is available" (confusing margin with risk)
- • Keeping position size fixed as account grows/shrinks
- • Confusing "pips" with "points" and accidentally over-leveraging
- • Revenge trading with 2x-5x normal size after losses
Your Position Sizing Action Plan
Position sizing is not a shortcut to profits, it's the minimum requirement for survival. Consistently applying "same risk percentage, calculated from stop distance" eliminates one major source of trading variance.
Next Steps
Once you've mastered position sizing, build on this foundation with:
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