Position size calculator
Why use a position size calculator?
The size of a position decides how much a losing trade costs, far more than the entry price does. A position size calculator reverses the usual question. Instead of asking "how many lots shall I buy?", it asks "how much am I prepared to lose if my stop-loss is hit?" and then finds the lot size that matches.
Position size (lots) = amount at risk ÷ (stop-loss in pips × pip value per lot)
Worked example
These figures are illustrative. Your account holds $5,000 and you decide to risk 1% on the trade: $50. You plan to buy EUR/USD with a stop-loss 20 pips below your entry. On a USD-quoted pair one pip on a standard lot is worth $10.
Position size = $50 ÷ (20 × $10) = $50 ÷ $200 = 0.25 lots, or 25,000 euros. If the stop is hit, the loss is 20 pips × $2.50 per pip = $50, as planned, plus spread and any commission.
Widen the stop to 40 pips and the same $50 risk allows only 0.125 lots. Most platforms round lot sizes to two decimal places, so you would trade 0.12 lots and risk slightly less.
Reading the result sensibly
- Place the stop first. Set it where the trade idea is proved wrong, then let the calculator size the position. Do not move the stop to fit a larger position.
- Choose a modest risk percentage. Many traders cap risk per trade at 1% to 2%. A run of losses is normal, and small risk keeps you in the game.
- Remember gaps. Over weekends or around big announcements, the price can jump past your stop, and the loss can exceed the planned amount.
- Check margin. A correctly sized position still needs margin; confirm it in the margin calculator.
For how pip values are calculated on crosses and yen pairs, see the pip calculator. For a broader discussion of risk rules within a trading plan, read best forex strategy? read this first.