Key takeaways
- Decide the loss you accept first; position size follows from it.
- Keep the percentage small and constant.
- Include spread and slippage when you set the stop.
Position size is the one risk decision completely under your control. A simple worksheet turns 'I am willing to lose this much' into a number of units to trade.
The five lines
- Account equity. Use current equity, not the original deposit.
- Risk per trade. Choose a fixed percentage, commonly between 0.5% and 2%.Tip: Smaller while you are learning.
- Risk in money. Equity multiplied by risk percentage.
- Stop distance. Distance from entry to stop, in price units, set by the chart, not by the size you want.
- Position size. Risk in money divided by (stop distance times value per unit).
Worked example in forex
Equity 5,000 USD, risk 1% means 50 USD at risk. Your stop on EUR/USD is 25 pips away. A pip is worth about 10 USD per standard lot, so 25 pips costs 250 USD per lot. Position size is 50 divided by 250, which is 0.2 lots (two mini lots). If the spread is 0.3 pips, add that to the effective stop distance.
| Input | Value |
|---|---|
| Equity | 5,000 USD |
| Risk | 1% = 50 USD |
| Stop distance | 25 pips |
| Value per pip per lot | 10 USD |
| Position size | 50 / (25 x 10) = 0.2 lots |
Use the calculatorsBrokeli's lot-size and pip-value calculators run the same arithmetic. Broker-specific costs belong in the fee calculator, which uses verified schedules.