ForexHow to calculate position size in forex
Position sizing decides how much you lose when a trade goes wrong. Setting it from your stop-loss and a fixed share of your account keeps any single loss small, whatever the pair or the leverage on offer.
The formula
Position size (lots) = money at risk ÷ (stop-loss in pips × pip value per lot)
Money at risk is the share of your account you are prepared to lose on this trade. Many traders use 0.5% to 2%.
Worked example
Account balance $5,000. Risk 1%, so $50. You buy EUR/USD with a stop-loss 25 pips away. Pip value on one standard lot is $10.
$50 ÷ (25 × $10) = 0.20 lots (20,000 units). If the stop is hit, you lose about $50 plus costs.
Check the margin as well
Position size sets your risk; leverage sets the margin you need to open it. At EUR/USD 1.1000 and 1:30 leverage, 20,000 units needs about $733 of margin. If the margin is more than you can comfortably hold, reduce the size.
A wider stop means a smaller position for the same risk. Do not tighten a stop just to trade a bigger size.
Position size calculator
Enter your balance, the share you are willing to risk and your stop-loss distance. Use $10 per lot for pairs quoted in US dollars, or work out the pip value with our pip calculator.
Common mistakes
Related reading: where to place your stop-loss and forex order types explained.