Position Sizing
Position sizing determines how much to trade. Size correctly, and a losing trade won’t hurt. Size wrong, and a single loss can blow your account.
Position Sizing Formula
Step 1: Calculate Risk Amount
Risk Amount = Account × Risk %
Example:
Account: $10,000
Risk per trade: 2%
Risk Amount = $10,000 × 0.02 = $200
Step 2: Calculate Stop in Pips
Stop Pips = Stop Price - Entry Price
Example:
Entry: 1.1000
Stop: 1.0950
Stop Pips: 50 pips
Step 3: Calculate Position Size
Position Size = Risk Amount ÷ Stop Pips ÷ Pip Value
Example:
Risk Amount: $200
Stop Pips: 50
Pip Value: $10/pip
Position = $200 ÷ 50 ÷ $10 = 0.4 lots
Lot Size Reference
Standard Lots (Forex)
| Lot | Units | Value per Pip |
|---|---|---|
| 0.01 lot | 1,000 | $0.10 |
| 0.1 lot | 10,000 | $1.00 |
| 1.0 lot | 100,000 | $10.00 |
| 10 lots | 1,000,000 | $100.00 |
Position Sizing Tables
With 2% Risk
| Account | 20 pips | 50 pips | 100 pips |
|---|---|---|---|
| $1,000 | 1.0 lot | 0.4 lot | 0.2 lot |
| $5,000 | 5.0 lots | 2.0 lots | 1.0 lot |
| $10,000 | 10.0 lots | 4.0 lots | 2.0 lots |
| $25,000 | 25.0 lots | 10.0 lots | 5.0 lots |
| $50,000 | 50.0 lots | 20.0 lots | 10.0 lots |
With 1% Risk
| Account | 20 pips | 50 pips | 100 pips |
|---|---|---|---|
| $1,000 | 0.5 lot | 0.2 lot | 0.1 lot |
| $5,000 | 2.5 lots | 1.0 lot | 0.5 lot |
| $10,000 | 5.0 lots | 2.0 lots | 1.0 lot |
| $25,000 | 12.5 lots | 5.0 lots | 2.5 lots |
| $50,000 | 25.0 lots | 10.0 lots | 5.0 lots |
Position Sizing by Strategy
| Strategy | Risk % | Typical Stop |
|---|---|---|
| Scalping | 0.25% | 5-10 pips |
| Day Trading | 0.5% | 20-30 pips |
| Swing Trading | 1-2% | 50-100 pips |
| Position Trading | 2-3% | 100+ pips |
Common Mistakes
1. Fixed Lot Size
Problem: Same size every trade.
Result: Variable risk.
Fix: Calculate each trade.
2. Ignoring Volatility
Problem: Same stop in high/low volatility.
Result: Over or under risk.
Fix: Adjust position size to volatility (ATR).
3. Rounding
Problem: Rounding up position.
Result: Exceeding risk.
Fix: Round down.
Quick Reference
Position Size = Account × Risk% ÷ Stop Pips ÷ Pip Value
$10,000 × 2% ÷ 50 ÷ $10 = 0.4 lots
↓ ↓
$200 $10/pip
Key Takeaways
- Calculate each trade — Every trade gets sized
- Maximum 2% — Never risk more
- Match to volatility — Wider stop = smaller size
- Round down — Never exceed risk
- Formula above — Use it
Related
stop-loss.md >>>
daily-limits.md >>>
Size correctly. Trade safely.