Forex Position Sizing
Position sizing means choosing how many lots to trade so that, if your stop loss is hit, you lose exactly the amount you planned — no more. It is the link between your risk rule and your actual trade.
The Position Size Formula
You need three numbers: how much money you will risk, how far away your stop is in pips, and what one pip is worth for one standard lot.
- Risk $ = account balance × risk % (see Risk Management).
- Stop pips = distance from entry to stop loss.
- Pip value per lot = value of a 1-pip move on 1 standard lot (100,000 units), in your account currency.
Note: The stop comes first, the size comes second. You place the stop where the chart says the trade is wrong, then size the position to fit. Never move the stop to fit a size you wanted.
Pip Value per Standard Lot
For a USD account, the pip value depends on the quote currency (the second currency in the pair). See Pips and Lot Sizes for the full method.
| Pair | Price | Calculation | Pip value / lot |
|---|---|---|---|
| EUR/USD, GBP/USD, AUD/USD | any | 0.0001 × 100,000 = $10 | $10.00 |
| USD/JPY | 150.00 | 0.01 × 100,000 = ¥1,000 ÷ 150.00 | $6.67 |
| USD/CAD | 1.3600 | 0.0001 × 100,000 = C$10 ÷ 1.3600 | $7.35 |
| USD/CHF | 0.8800 | 0.0001 × 100,000 = CHF 10 ÷ 0.8800 | $11.36 |
| EUR/GBP | 0.8545 | £10 × GBP/USD 1.2700 | $12.70 |
| GBP/JPY | 190.50 | ¥1,000 ÷ USD/JPY 150.00 | $6.67 |
Tip: For crosses (pairs without USD), convert the quote currency into USD. For EUR/GBP the quote is GBP, so use GBP/USD. For GBP/JPY the quote is JPY, so use USD/JPY.
Worked Examples
Example 1: EUR/USD
Account $10,000, risk 1%, buy EUR/USD at 1.0850, stop at 1.0825.
Risk $ = $10,000 × 1% = $100 Stop pips = 1.0850 − 1.0825 = 25 pips Pip value = $10 per lot Lots = $100 ÷ (25 × $10) = $100 ÷ $250 = 0.40 lots
Check: 0.40 lots = $4 per pip. 25 pips × $4 = $100 ✓
Example 2: USD/JPY
Account $10,000, risk 1%, sell USD/JPY at 150.00, stop at 150.40.
Risk $ = $100 Stop pips = 150.40 − 150.00 = 0.40 = 40 pips (JPY pip = 0.01) Pip value = ¥1,000 ÷ 150.00 = $6.67 per lot Lots = $100 ÷ (40 × $6.67) = $100 ÷ $266.67 = 0.375 Round down → 0.37 lots
Check: 0.37 × $6.667 = $2.467 per pip × 40 = $98.67 — just under the $100 limit ✓
Example 3: EUR/GBP (a cross)
Account $5,000, risk 2%, buy EUR/GBP at 0.8545, stop at 0.8525. GBP/USD is 1.2700.
Risk $ = $5,000 × 2% = $100 Stop pips = 0.8545 − 0.8525 = 20 pips Pip value = £10 × 1.2700 = $12.70 per lot Lots = $100 ÷ (20 × $12.70) = $100 ÷ $254 = 0.394 Round down → 0.39 lots
Check: 0.39 × $12.70 = $4.95 per pip × 20 = $99.06 ✓
Example 4: GBP/JPY (a volatile cross)
Account $20,000, risk 1%, buy GBP/JPY at 190.50, stop at 189.90. USD/JPY is 150.00.
Risk $ = $20,000 × 1% = $200 Stop pips = 190.50 − 189.90 = 0.60 = 60 pips Pip value = ¥1,000 ÷ 150.00 = $6.67 per lot Lots = $200 ÷ (60 × $6.67) = $200 ÷ $400 = 0.50 lots
Warning: Always round down, never up. Rounding 0.375 up to 0.38 lots means risking more than your rule allows. Small overshoots add up over hundreds of trades.
Try It Yourself
Use the calculator to size any trade. Change the pair, stop distance and risk to see how the lot size changes.
Note: If your account is not in USD (for example EUR or GBP), convert the pip value into your account currency. Most broker platforms and calculators do this for you.
Fixed Fractional vs Fixed Lot
There are two common ways to size trades over time.
Fixed fractional
Risk the same percentage of the current balance on every trade (e.g. 1%). Size shrinks after losses and grows after wins.
Protects you in drawdowns and compounds gains. Used by most professionals.
Fixed lot
Trade the same lot size every time (e.g. always 0.50 lots), whatever the stop distance.
Simple, but your real risk changes with every trade: a 50-pip stop risks twice as much as a 25-pip stop.
Example
You start with $10,000 and risk 1% per trade. After a losing run, your balance is $9,000.
Fixed fractional: 1% of $9,000 = $90 risk (was $100) Fixed $100 risk: $100 ÷ $9,000 = 1.11% risk — now higher
Fixed fractional automatically slows you down when things go badly.
ATR-Based Sizing
ATR (Average True Range) measures how much a pair normally moves per candle. Using ATR for your stop means the stop adapts to current volatility. Position sizing then keeps the dollar risk the same whatever the volatility. See ATR & Volatility.
Example
Account $10,000, risk 1% = $100. EUR/USD, stop = 1.5 × ATR(14).
Calm week: ATR = 20 pips → stop 30 pips
Lots = $100 ÷ (30 × $10) = 0.333 → 0.33 lots
Volatile week: ATR = 40 pips → stop 60 pips
Lots = $100 ÷ (60 × $10) = 0.1667 → 0.16 lots
When volatility doubles, the stop doubles and the size halves. The risk stays at about $100.
Tip: ATR sizing is how many professional trend followers trade. It keeps each trade's risk equal, so no single volatile pair dominates your results.
Common Mistakes
- Choosing the lot size first, then squeezing the stop to fit.
- Forgetting that JPY pairs have a different pip size (0.01).
- Using $10 per pip for every pair — wrong for USD/JPY, USD/CAD and crosses.
- Ignoring spread and commission, which add a little to the real risk.
- Using the same size on correlated trades without reducing total risk.
Test Yourself With Exercises
Account $8,000, risk 1.5%, EUR/USD stop 30 pips. What is the position size?
- 0.30 lots
- 0.40 lots
- 0.80 lots
- 1.20 lots
USD/JPY is at 150.00. What is the pip value of 1 standard lot in USD?
- $10.00
- $1.50
- $6.67
Your calculation gives 0.276 lots. What should you trade?
- 0.27 lots
- 0.28 lots
- 0.30 lots
ATR doubles while your risk stays at 1%. If you use an ATR-based stop, what happens to your lot size?
- It doubles
- It stays the same
- It goes to zero
- It roughly halves
Which method risks the same percentage of the current balance on every trade?
- Fixed lot
- Fixed fractional
- Martingale