Position size

Position size is the volume of a trade: 1 standard lot is 100,000 units of the base currency, 0.1 lots is a mini lot (10,000) and 0.01 lots is a micro lot (1,000). It decides what each pip is worth, and therefore how much money a given price move makes or loses.

Many traders size positions from risk rather than from margin, using a fixed percentage of the account per trade:

Position size = money at risk divided by (stop distance in pips times pip value per lot)

Example

Illustrative figures: a 10,000-dollar account, risking 1% (100 dollars) per trade on EUR/USD. The stop-loss is 25 pips from entry. One standard lot is worth 10 dollars per pip.

• Loss on 1 lot at the stop = 25 times 10 = 250 dollars
• Position size = 100 divided by 250 = 0.4 lots

If the stop needs to be 50 pips away instead, the size halves to 0.2 lots. The money at risk stays the same; only the size changes. The position size calculator does this for any pair and account currency.

Common mistakes

• Choosing size first and squeezing the stop to fit, which puts the stop where it is likely to be hit by normal noise.
• Sizing from available margin. Being allowed to open 2 lots does not mean you should.
• Forgetting that gaps and slippage can make the actual loss bigger than planned.
• Ignoring correlation: three positions that all depend on the dollar can add up to one oversized bet.

Our guides to position sizing and lot sizes go through more examples.