Result
Risk Amount: 100.00 USD
Formula
100.00 USD ÷ (50 pips × 10.00 CAD/pip) = 0.20 lotsPosition sizing is the process of determining how many lots to trade based on your account size and the amount of risk you're willing to take on a single trade. It is arguably the most important skill in trading — more important than entry signals or technical analysis.
The golden rule of risk management is to never risk more than 1–2% of your account balance on any single trade. If your account is $10,000 and you risk 1% per trade, your maximum loss per trade is $100. Position sizing calculates the exact lot size that keeps you within this limit.
Without proper position sizing, even a winning strategy can blow an account. A trader who risks 10% per trade only needs 10 consecutive losses to wipe out their account. A trader who risks 1% per trade can survive 100 consecutive losses — a nearly impossible scenario — and still have capital to recover.
Your total account equity in your base currency (USD, EUR, or GBP).
The percentage of your account you're willing to risk on this trade. Professional traders typically risk 0.5–2% per trade.
The distance from your entry to your stop loss. A tighter stop means a larger position size; a wider stop means a smaller one.
The calculator shows the exact lot size that keeps your risk within the specified percentage, plus the dollar amount at risk.
Common Questions