Position sizing: how much to risk per trade, and how to calculate the lot size

Two traders can take the same trade at the same price with the same stop and end up with very different accounts. The difference is size. Position sizing decides how much a single loss costs you, and so how many losses in a row you can survive while your edge plays out.

Start from risk, not from lots

Many traders pick a lot size first — "I trade 1 lot" — and let the stop decide how much they lose. That makes every loss a different size. Turn it around: decide how much of the account you are willing to lose if the stop is hit, then work out the size that makes that true.

Choosing a risk per trade

A fixed percentage of the account — often somewhere between 0.5% and 2% — is the usual starting point. The number matters less than keeping it constant. With 1% risk, ten losses in a row cost roughly 10% of the account; with 5% risk, the same streak costs about 40%, and every later trade has to work much harder to get it back.

On a prop firm account, size from the firm's limits as well: if the daily loss limit is 5%, a 2% risk per trade leaves room for only two full losses in a day.

The calculation

Position size = Risk amount ÷ (Stop distance × Value per point)

Example: a $10,000 account risking 1% has $100 to lose. The stop on EURUSD is 25 pips away, and one standard lot is worth about $10 per pip. $100 ÷ (25 × $10) = 0.4 lots. If the stop is 50 pips away, the size halves to 0.2 lots — the risk stays $100.

The value per point differs by instrument and by broker (gold, indices and crypto are quoted differently), so check the contract specification in your platform once and write it down.

Common mistakes

• Moving the stop further away after entry without reducing size — the risk quietly grows.
• Raising the size after a loss to win it back faster.
• Rounding up the lot size every time: 0.37 becomes 0.4, then 0.5.
• Forgetting spread and commission, which make the real loss slightly larger than planned.

Check it in your journal

Write the planned risk on every trade. After a few weeks, look at the losing trades: if some of them lost two or three times the usual amount, your sizing is not as fixed as you think. Measuring results in R (profit or loss divided by the planned risk) makes these outliers easy to spot.

In Simple Trading Journal

Each trade has a risk field, and results can be read in R. Your goals can include a maximum risk per trade, and the discipline view flags trades where the risk jumped to more than 1.5 times the previous trade right after a loss.