Position sizing connects your risk, your stop loss and your lot size. Master this and you'll never take a trade that can wreck you.
1$10,000account
2× 1%= $100 risk
3÷ 25 pipsyour stop
4÷ $10pip value per lot
5= 0.40 lotsyour size
Formula
Lots = (account × risk %) ÷ (stop in pips × pip value per lot)
Example
$10,000 account, 1% risk = $100. Stop loss 25 pips on EUR/USD ($10 per pip per lot). Lots = 100 ÷ 250 = 0.40 lots.
The key insight
Your stop is set by the chart (where you're wrong). Your lot size adjusts to fit it. Wide stop = smaller position. Tight stop = bigger position. Same dollar risk either way.
Wick says
Never move your stop to fit a lot size. Move your lot size to fit the stop. Tattoo it somewhere. Metaphorically.
Pro tip
Use the position size calculator before every trade until it becomes second nature.
Key takeaways
- Decide risk %, find the stop, then calculate lots.
- The stop comes from the chart, the size comes from the maths.
- Same risk on every trade keeps results consistent.