Position sizing in forex: worked examples for every kind of pair

Position sizing is the calculation that turns "I am willing to lose 1% of my account on this trade" into an exact lot size. The formula is: position size in lots = money at risk ÷ (stop distance in pips × pip value per lot in your account currency). The only tricky part is the pip value, which changes with the pair, the price and the currency your account is held in, so this guide works through each case with real arithmetic.

If you want the short version first, our beginner guide to lot sizes and position sizing covers lot definitions and the basic formula on EUR/USD. This guide goes further: JPY pairs, crosses, gold, euro and sterling accounts, small accounts, costs, correlation and what different risk levels do to an account over a losing streak.

The idea in one paragraph

Most new traders pick a lot size first, often whatever feels comfortable or whatever they traded last time, and then find out how much they risked when the trade closes. Position sizing reverses that. You decide how much money you are prepared to lose if the trade is wrong. You decide where the trade is wrong, which is your stop loss. The lot size is then the only thing left to calculate, and it falls out of the arithmetic. Risk stays constant; size flexes with the stop.

That one change does more for long-term survival than any entry technique, because it means no single trade can do outsized damage and your results start to reflect your decisions rather than random variation in size.

Step 1: choose your risk per trade

The common guidance is to risk between 0.5% and 2% of your account balance per trade, and many experienced traders stay at or below 1%. There is no magic number; the point is to choose one and apply it consistently.

Why so small? Because losing streaks are normal, even for a strategy that works. Here is what consecutive losses do to an account at different fixed percentages (each loss is a percentage of the balance at the time):

• 1% per trade: ten losses in a row leaves about 90.4% of the account.
• 2% per trade: ten losses leaves about 81.7%.
• 5% per trade: ten losses leaves about 59.9%.
• 10% per trade: ten losses leaves about 34.9%.

And the recovery needed from a drawdown is always larger than the drawdown:

• Down 10%, you need about 11% to get back to where you started.
• Down 20%, you need 25%.
• Down 40%, you need about 67%.
• Down 50%, you need 100%.

At 1% risk, a bad run is an irritation. At 5% or more, a bad run creates a hole that takes a very long time to climb out of, and the pressure of that hole tends to cause worse decisions. The trading psychology guide covers that side of it, and the risk-reward ratio guide shows how often streaks like this happen at different win rates.

Step 2: set the stop where the trade is wrong

The stop loss should go where the market would prove your idea wrong, not where it limits the loss to a comfortable number. If you put the stop at "whatever makes 1 lot cost $100", you are letting your size dictate your analysis, which is backwards. Our guide on where to put a stop loss covers structure-based and volatility-based approaches in depth.

Once the stop is set, measure the distance from entry to stop in pips (or in price, for gold and indices). Then add a small allowance for costs, which we come to below.

Step 3: find the pip value in your account currency

A pip is 0.0001 on most pairs and 0.01 on JPY pairs; the pip guide explains why. One standard lot is 100,000 units of the base currency. So the value of one pip on one lot, in the quote currency, is always:

• 100,000 × 0.0001 = 10 units of the quote currency on non-JPY pairs
• 100,000 × 0.01 = 1,000 yen on JPY pairs

That is the key fact. EUR/USD pips are worth 10 dollars per lot. EUR/GBP pips are worth 10 pounds per lot. USD/JPY pips are worth 1,000 yen per lot. USD/CAD pips are worth 10 Canadian dollars per lot.

Then convert that amount into your account currency:

• If the quote currency is your account currency, there is nothing to convert.
• If the base currency is your account currency, divide by the pair's own price.
• Otherwise, convert using the exchange rate between the quote currency and your account currency.

The currency pairs guide explains base and quote currencies if you need a refresher. Most platforms show pip value in the contract specification or in an on-screen calculator, but you should be able to do it by hand, because calculators are only as good as the settings you give them.

Step 4: calculate and round down

Position size in lots = money at risk ÷ (stop in pips × pip value per lot).

Most brokers allow sizes in steps of 0.01 lots (a micro lot, 1,000 units). Always round down to the nearest step. Rounding up means risking more than you decided to.

Now the worked examples. All prices and exchange rates below are illustrative, chosen to make the arithmetic clear; use live rates when you do this for real.

Example 1: EUR/USD in a US dollar account

The simplest case, because the quote currency is the account currency.

• Account: $10,000. Risk: 1% = $100.
• Stop distance: 40 pips.
• Pip value per lot: $10 (quote currency is USD, no conversion).
• Size = $100 ÷ (40 × $10) = $100 ÷ $400 = 0.25 lots.

Check: 0.25 lots is 25,000 euros. A 40-pip move is 0.0040 × 25,000 = $100. Correct.

Margin is a separate question. With EUR/USD at an illustrative 1.0800, 25,000 euros is worth $27,000. At the EU retail limit of 30:1 on majors, the margin required is $27,000 ÷ 30 = $900. Notice that the margin and the risk are different numbers. Margin is the deposit the broker holds; risk is what you lose if the stop is hit. The leverage and margin guide explains the difference.

Example 2: USD/JPY in a US dollar account

JPY pairs need a conversion, because the pip value is in yen.

• Account: $10,000. Risk: 1% = $100.
• USD/JPY price: 150.00 (illustrative).
• Stop distance: 50 pips, which on a JPY pair is 0.50 yen.
• Pip value per lot: 1,000 yen. In dollars, 1,000 ÷ 150.00 = $6.67.
• Size = $100 ÷ (50 × $6.667) = $100 ÷ $333.33 = 0.30 lots.

Keep three decimal places on the pip value until the last step. If you round it to $6.67 first, the answer comes out at 0.2999, which rounds down to 0.29: a small error, but one created entirely by the arithmetic rather than the market.

Note that the pip value changes as the price changes. At USD/JPY 140.00 a pip on one lot is worth $7.14; at 160.00 it is worth $6.25. That is why a fixed "pips × $10" shortcut is wrong for JPY pairs, and wrong by a lot.

Example 3: EUR/USD in a sterling account

Now the account currency is neither the base nor the quote.

• Account: £5,000. Risk: 1% = £50.
• Stop distance: 35 pips.
• Pip value per lot: $10. GBP/USD at 1.2700 (illustrative), so $10 ÷ 1.2700 = £7.87.
• Size = £50 ÷ (35 × £7.87) = £50 ÷ £275.45 = 0.1815, rounded down to 0.18 lots.
• Actual risk at 0.18 lots: 0.18 × 35 × £7.87 = £49.58.

UK traders who use the "$10 a pip" rule of thumb as if it were £10 a pip would size this trade about 21% too small, at 0.14 lots, because each pip is really worth less than £10. A trader whose account currency is worth less than the dollar makes the opposite error and sizes too large, which is the more dangerous direction.

Example 4: EUR/USD in a euro account

The account currency is the base currency of the pair, so you divide by the pair's own price.

• Account: €8,000. Risk: 1% = €80.
• EUR/USD at 1.0800 (illustrative). Stop distance: 30 pips.
• Pip value per lot: $10 ÷ 1.0800 = €9.26.
• Size = €80 ÷ (30 × €9.26) = €80 ÷ €277.80 = 0.288, rounded down to 0.28 lots.

Example 5: EUR/GBP in a US dollar account

A cross, where the quote currency is sterling.

• Account: $10,000. Risk: 1% = $100.
• Stop distance: 30 pips.
• Pip value per lot: £10. With GBP/USD at 1.2700, that is £10 × 1.2700 = $12.70.
• Size = $100 ÷ (30 × $12.70) = $100 ÷ $381 = 0.262, rounded down to 0.26 lots.
• Actual risk: 0.26 × $381 = $99.06.

Notice that a pip on EUR/GBP is worth more than a pip on EUR/USD, because a pound is worth more than a dollar. EUR/GBP also tends to move fewer pips per day than EUR/USD, so stops are often tighter. Both effects matter to the final size.

Example 6: GBP/JPY in a euro account

The full conversion: a JPY cross in a euro account.

• Account: €8,000. Risk: 1% = €80.
• Stop distance: 80 pips (0.80 yen). GBP/JPY is a volatile pair, so wider stops are normal.
• Pip value per lot: 1,000 yen. With EUR/JPY at 165.00 (illustrative), 1,000 ÷ 165.00 = €6.06.
• Size = €80 ÷ (80 × €6.06) = €80 ÷ €484.80 = 0.165, rounded down to 0.16 lots.
• Actual risk: 0.16 × €484.80 = €77.57.

You do not need the GBP/JPY price itself for the pip value, only the rate between the quote currency (yen) and your account currency (euro).

Example 7: gold (XAU/USD) in a US dollar account

Gold is where position-sizing errors are most common, because "pip" means different things at different brokers. Some call 0.01 a pip, some call 0.10 a pip, and some just talk in points. The safe approach is to ignore pips and work in dollars of price movement.

Check the contract specification first. On many platforms one lot of XAU/USD is 100 troy ounces, so a $1.00 move in the gold price is worth $100 per lot, and 0.01 lots is 1 ounce, worth $1 per $1 move. Some brokers use different contract sizes, so confirm yours before trusting this.

• Account: $10,000. Risk: 1% = $100.
• Stop distance: $12.00 below entry in the gold price.
• Loss per lot if stopped: $12.00 × 100 oz = $1,200.
• Size = $100 ÷ $1,200 = 0.083, rounded down to 0.08 lots (8 ounces).
• Actual risk: 8 × $12.00 = $96.

Two things to notice. First, gold's daily range is large in dollar terms, so sensible stops are often wide, and position sizes come out much smaller than on EUR/USD. Second, the minimum size matters more: 0.01 lots on this stop risks $12, so on a small account the minimum step itself can be a large slice of your 1%. Gold is also capped at 20:1 leverage for EU retail clients rather than 30:1, so the margin per lot is higher than on major pairs.

The same "work in price, not pips" approach applies to index and commodity CFDs. Find the value per point per contract in the specification, multiply by the stop distance in points, and divide your risk by the result.

Example 8: a small account

Small accounts run into the minimum lot size.

• Account: $1,000. Risk: 1% = $10.
• EUR/USD, 30-pip stop: $10 ÷ (30 × $10) = 0.033, so 0.03 lots, risking $9. Fine.
• EUR/USD, 120-pip stop: $10 ÷ (120 × $10) = 0.0083 lots. The minimum is 0.01 lots, which risks $12, or 1.2%.

At that point you have three honest choices: skip the trade, accept a slightly higher risk on this one occasion and record that you did, or look for a setup with a tighter, still-valid stop. The dishonest choice is to shrink the stop to make the numbers work. That just converts a well-placed stop into a badly placed one.

Include costs in the stop distance

The formula assumes you lose exactly the stop distance. You do not. You also pay the spread, possibly a commission, and possibly slippage on the exit.

• Spread. A long position opens at the ask and closes at the bid. If you measure your stop from the chart's mid or bid price, you lose the spread on top. Add it to the stop distance.
• Commission. On a raw-spread account at, say, $7 per lot round turn, a 0.25-lot trade costs $1.75. Either subtract that from the money at risk before sizing, or convert it into pips (on EUR/USD, $7 per lot is 0.7 pips) and add it to the stop.
• Slippage. Stops are market orders when triggered and can fill beyond their level. If your records show your stops slip by about a pip on average, add a pip. The slippage guide explains why it happens.

Example: a 40-pip stop on EUR/USD with a 0.2-pip spread, a 0.7-pip commission equivalent and a 1-pip slippage allowance becomes an effective 41.9-pip stop. On $100 of risk that changes the size from 0.25 lots to 0.238, rounded down to 0.23 lots. Small change, but it is the difference between risking 1% and risking slightly more than 1% on every trade, forever. The spreads and commissions guide shows how to calculate all-in costs per lot.

Correlation: two trades can be one risk

Position sizing is per idea, not per ticket. If you buy EUR/USD and GBP/USD at 1% each, you have not taken two independent 1% risks. Both trades are mostly a bet against the US dollar, and when the dollar rallies both are likely to lose together. In practice that is close to a 2% position on one idea.

A simple rule: when trades share a currency and the same direction on that currency, treat them as one position and split your normal risk between them. Long EUR/USD and long AUD/USD at 0.5% each is roughly one 1% trade on dollar weakness.

The same logic applies to holding the same pair on two timeframes, or a forex pair and a correlated index or commodity.

Margin, leverage and position size

Position sizing and leverage answer different questions. Position sizing answers "how much do I lose if I am wrong?" Leverage answers "how much deposit does the broker need to let me hold this?"

With sensible percentage risk, the margin needed is usually a small fraction of the account. In Example 1, a $10,000 account holding 0.25 lots of EUR/USD uses $900 of margin, about 9% of the account. That leaves plenty of room before any margin call or stop-out. Margin problems mostly arise when traders size from leverage ("I can afford 3 lots, so I will trade 3 lots") rather than from risk.

A quick sanity check: if a trade uses more than about a third of your account as margin, re-check the size. You have probably either miscalculated or set a very tight stop.

Choosing a sizing method

There are several ways to size positions. The percentage-risk method in this guide is the most widely used for discretionary traders, but it helps to know the alternatives.

• Fixed lot size. Always trade, say, 0.10 lots. Simple, but your risk swings with every stop distance. A 20-pip stop and a 100-pip stop on the same size are very different bets.
• Fixed money amount. Always risk $100. Better, and the same as percentage risk at a fixed balance. It does not scale down automatically during a drawdown.
• Fixed percentage of balance. Always risk 1% of the current balance. Risk shrinks as the account falls and grows as it rises. This is the method used throughout this guide.
• Volatility-based. Size so that each trade carries the same risk measured in units of volatility, such as a multiple of the Average True Range. This is common in systematic trend-following and pairs naturally with ATR stops.
• Optimal-growth formulas. The Kelly criterion and related methods calculate a size from your edge. They need accurate estimates of win rate and average win and loss, which most traders do not have, and errors push the size too high. If you use them at all, use a small fraction of what they suggest.

Whichever method you choose, write it down, apply it to every trade and track it in your trading journal. Consistent sizing is what makes your trading statistics meaningful.

Common mistakes

• Using $10 a pip for everything. It is only true for pairs quoted in your account currency. On JPY pairs, crosses, gold and non-dollar accounts it can be badly wrong.
• Rounding up. Always round down to the nearest lot step.
• Moving the stop to fit a size. Set the stop from the chart, then size. Never the other way round.
• Ignoring costs. Spread, commission and slippage come on top of the stop distance.
• Stacking correlated trades. Five dollar trades at 1% each is a 5% dollar trade.
• Sizing from leverage. The maximum size the broker allows is not a recommendation. Under the ESMA rules, retail leverage is capped at 30:1 on major pairs and lower on everything else, which still lets you take far more risk than is sensible. See our guide to ESMA leverage limits.
• Raising the percentage after losses to "win it back". This is the fastest route to the large drawdowns shown above.
• Forgetting the balance has changed. Recalculate 1% from the current balance, not the balance you started with.

None of this changes the underlying odds. Most retail CFD accounts lose money, as our risk warning explains, and leverage magnifies losses. Position sizing does not make a losing approach profitable. It keeps losses small enough that you can find out whether your approach works.

Frequently asked questions

How do I calculate lot size in forex?

Divide the money you are willing to lose by the stop distance in pips multiplied by the pip value per lot in your account currency. For example, $100 ÷ (40 pips × $10) = 0.25 lots on EUR/USD in a dollar account. Round down to the nearest 0.01 lots.

How do I calculate pip value on JPY pairs?

One pip on a JPY pair is 0.01, so one standard lot moves 1,000 yen per pip. Convert that to your account currency: in a dollar account divide 1,000 by the USD/JPY price, and in a euro account divide by the EUR/JPY price. At USD/JPY 150.00, a pip on one lot is worth about $6.67.

How do I size a position on gold?

Ignore pips and work in price. Check your broker's contract size, often 100 ounces per lot, so each $1 move in gold is worth $100 per lot. Multiply your stop distance in dollars by that figure to get the loss per lot, then divide your money at risk by it.

What percentage of my account should I risk per trade?

Common guidance is 0.5% to 2%, and many experienced traders use 1% or less. Lower risk means smaller drawdowns during losing streaks, which are normal for any approach. Pick a percentage you could sustain through ten consecutive losses without changing your behaviour.

Should I risk a percentage of balance or equity?

Balance is simpler and is what most traders use. Equity, which includes open profit and loss, is more conservative if you often hold several trades at once, because it reduces new position sizes while existing trades are losing. Either is fine if you apply it consistently.

Does leverage change my position size?

No. Your position size comes from your risk and your stop. Leverage only determines how much margin the broker holds against that position. Higher available leverage just means a lower margin requirement for the same size, and makes it easier to over-trade if you size from margin instead of from risk.