Position Sizing
a.k.a. Trade sizing
Working out how big each trade should be so that, if your stop is hit, you lose only what you planned to.
Position sizing answers the question, "How much should I trade?" Not "how much can I?" The usual method: decide how much of your account you are willing to lose on this trade, find the distance to your stop-loss in pips, then pick a lot size so that distance equals that loss.
It is the quiet superpower of risk management. Two traders can take the exact same trade; the one who sized it properly survives a losing streak, and the one who did not, does not.
Sizing a trade to risk 1%
- Account: 10,000 dollars. Risk 1% = 100 dollars.
- Stop-loss is 40 pips away.
- 100 ÷ 40 = 2.50 dollars per pip.
- On EUR/USD, a mini lot is about 1 dollar per pip, so trade 2.5 mini lots (0.25 standard).
Bottom line: If the stop is hit, you lose about 100 dollars, exactly what you planned.
Choosing the lot size first and then placing the stop wherever the loss "feels okay". The stop goes where the trade idea is wrong; the size follows from that.
Keep this word for good
Your free Private Swap Lounge saves the terms you’ve learned and quizzes you on them. Portal under construction. Expected delivery date is December 01, 2026.