How to calculate position size in forex
Position size is how many lots you trade. Work it out from the amount you are willing to lose, not from a feeling about the trade.
For information only, not financial advice. Trading carries a high risk of loss. Results depend on the values you enter and on your broker's contract specifications. Risk disclosure
The short answer
Position size is the number of lots you trade. You do not pick it by feel. You decide how much money you are willing to lose if the trade fails, decide where your stop-loss goes, and let those two numbers set the size. The formula is: lots = money at risk / (stop-loss in pips x pip value per lot).
Step by step
- Choose the risk per trade as a percentage of your balance. Many traders use between 0.5% and 2%. On a $10,000 account, 1% is $100.
- Choose the stop-loss distance in pips, from the chart and not from the size you would like. Say 50 pips on EUR/USD.
- Find the pip value per standard lot. For a pair quoted in US dollars and a USD account it is $10 per pip.
- Divide: $100 / (50 pips x $10) = 0.20 lots.
- Round down to the lot step your broker allows, usually 0.01.
Worked example: EUR/USD
Balance $10,000, risk 1%, stop-loss 50 pips. The money at risk is $100. One pip on a standard lot is worth $10, so a 50 pip stop on a full lot would lose $500. You only want to lose $100, which is one fifth of that, so you trade 0.20 lots. If the stop is hit, the loss is 0.20 x 50 x $10 = $100, exactly the amount you chose.
Worked example: USD/JPY
On yen pairs the pip is 0.01 and the pip value is first worked out in yen. One pip on a standard lot of USD/JPY is 1,000 yen. At a price of 150.00 that is about $6.67. With the same $100 of risk and a 40 pip stop, the size is $100 / (40 x $6.67) = 0.375 lots. Round down to 0.37 lots. The loss at the stop is then 0.37 x 40 x $6.67 = about $98.67, a little under your limit, which is the safe side to be on.
A wider stop means a smaller position
| Stop-loss | Money at risk | Pip value per lot | Position size |
|---|---|---|---|
| 25 pips | $100 | $10 | 0.40 lots |
| 50 pips | $100 | $10 | 0.20 lots |
| 100 pips | $100 | $10 | 0.10 lots |
The money at risk stays the same, so doubling the stop halves the size. This is why you set the stop first: if you pick a size first and then squeeze the stop to fit it, you are guessing, not managing risk.
The same trade on different accounts
| Balance | Risk 1% | Stop-loss | Position size |
|---|---|---|---|
| $5,000 | $50 | 50 pips | 0.10 lots |
| $10,000 | $100 | 50 pips | 0.20 lots |
| $25,000 | $250 | 50 pips | 0.50 lots |
Common mistakes
- Rounding the size up, which makes the real loss larger than the amount you chose.
- Using the wrong pip value. It depends on the pair and on your account currency, so check it for each trade.
- Forgetting that a stop can be filled at a worse price in a fast market, so the real loss can exceed the plan.
- Counting leverage as the thing that sets size. It does not: it only sets how much margin is held.
These numbers are estimates for information only, not financial advice. Check pip values and lot rules with your broker, and remember that trading carries a high risk of loss.
Where to go next
The position size calculator does these steps for you and shows its working. To see what a pip is worth for your own pair, use the pip value calculator, and to choose a stop from a price level use the stop-loss calculator.
Frequently asked questions
+What is the position size formula in forex?
Lots = (account balance x risk percentage) / (stop-loss in pips x pip value per lot). The top line is the money you accept losing, the bottom line is what one lot loses if the stop is hit.
+How much of my account should I risk per trade?
There is no single right answer, but many traders keep it between 0.5% and 2% of the balance. The smaller the percentage, the more losing trades in a row the account can absorb.
+Why does a wider stop-loss mean a smaller position?
Because the money at risk stays fixed. A wider stop loses more per lot, so you must trade fewer lots to keep the total loss at the same amount.
+Should I round the lot size up or down?
Down. Rounding up makes the loss at your stop larger than the amount you chose. Most platforms accept lots in steps of 0.01, so 0.376 becomes 0.37.
+Does leverage change my position size?
No. Leverage only decides how much margin your broker holds back for the position. The size comes from your risk amount and your stop-loss.