How to Calculate Position Size
Position sizing answers one question: given where my stop is, how big can this trade be so that being wrong costs exactly the amount I chose? It is the bridge between risk management as a principle and a live order ticket, and it is four numbers and one division.
The formula
size = risk money ÷ (stop distance × value per unit of distance)
- Risk money: account × risk percent. A $10,000 account at 1% risks $100.
- Stop distance: from entry to stop, in pips or points — set by the chart's structure, never by the size you want.
- Value per pip per lot: what one pip of movement is worth for one lot of this instrument in your account currency.
- Divide: the result is the largest size at which the stop costs your chosen risk.
Worked examples
EUR/USD, USD account. $100 risk, 25-pip stop. One standard lot is ~$10 per pip, so the stop costs $250 per lot. $100 ÷ $250 = 0.40 lots.
USD/JPY. Same $100 risk, 40-pip stop. A pip is 0.01 and its dollar value floats with the rate (≈ $6.7 per lot near 150). Stop ≈ $268 per lot → 0.37 lots. The lesson: yen-pair pip values are not the tidy $10 many traders assume.
XAU/USD (gold). $100 risk, a $4.00 stop. One lot is 100 oz, so the stop costs $400 per lot → 0.25 lots. Metals and indices each have their own contract value — check the specification rather than guessing.
Where sizing goes wrong
- Sizing first, stop second: choosing the lots you want and then finding a stop that "affords" it puts the stop where the money is comfortable instead of where the idea is wrong.
- Ignoring the conversion: pip values change with the quote currency and, for non-USD accounts, with your own exchange rate.
- Leverage as a sizing rule: available leverage says what the broker permits, not what your risk allows. A correctly sized trade usually uses a fraction of it.
- Adding without re-sizing: a second entry on the same idea is more risk on that idea; the combined position should still respect one risk number.
Consistency is the point
When every trade risks the same fraction, results become comparable and every statistic in your record — expectancy, average win, drawdown — means what it says. Wildly varying size makes even a genuine edge unreadable, because one oversized loss speaks louder than ten well-sized wins.
Every CLIMB entry stores the money actually at risk, and its model can propose the risk for the next trade from the account's own ladder — so a trade sized off-model is visible on the record as exactly that, with the gap measured.