How to calculate position size in forex
Position sizing answers one question: how many units can I hold so that, if my stop loss is hit, I lose exactly the amount I planned to risk — and no more? Three inputs decide it: your account balance, the percentage of it you're willing to risk, and the distance to your stop loss in pips.
Your risk amount is simply balance × risk %. Pip value per unit is 0.0001 for most pairs (0.01 for JPY pairs), converted into your account currency if the pair is quoted in something else. Divide the resulting units by 100,000 for standard lots, 10,000 for mini lots, or 1,000 for micro lots.
Worked example
Account: £10,000 · Risk: 1% (£100) · Stop loss: 20 pips · Pair: GBP/USD · GBP account
GBP/USD is quoted in USD, so the pip value converts at today's USD→GBP rate (say 0.79): 0.0001 × 0.79 = £0.000079 per unit.
Units = £100 ÷ (20 × £0.000079) = 63,291 units ≈ 0.63 standard lots.
Why lot size matters more than entry
Two traders can take the identical entry and stop, and one blows up while the other compounds steadily — the difference is position size. Risking a fixed small percentage per trade means no single loss, or even a losing streak, can do serious damage. At 1% risk per trade, ten consecutive losses draw the account down roughly 10%. At 10% risk, the same streak cuts it by more than 60%.
The most common sizing mistakes are picking a "usual" lot size regardless of stop distance, forgetting that JPY pairs have a different pip size, and ignoring the conversion between the pair's quote currency and the account currency. This calculator handles all three.
FAQ
How much should I risk per trade?
Most risk-management guidance for retail FX traders sits between 0.5% and 2% per trade. The right number depends on your win rate and how you handle drawdowns psychologically — but it should be a rule you set in advance, not a feeling per trade.
What's the difference between standard, mini and micro lots?
A standard lot is 100,000 units of the base currency, a mini lot is 10,000, and a micro lot is 1,000. Brokers typically let you trade in increments of 0.01 standard lots (one micro lot).
Why do I need a conversion rate for some pairs?
Pip value arrives in the pair's quote currency (the second one). If your account is in GBP but you're trading EUR/JPY, the pip value in JPY must be converted to GBP at today's rate before the maths works. This page fetches a live rate automatically and lets you override it with your broker's quote.
Does this work for gold, indices or crypto?
This calculator is built for FX pairs, where pip sizes are standardised. Contract specifications for metals, indices and crypto vary by broker, so check your broker's per-point value for those.