Two traders take the identical setup. One loses 1% and shrugs; the other loses 12% and spirals. Same entry, same stop — the entire difference was position size. Sizing is where risk management stops being philosophy and becomes arithmetic.
The formula
Size = (Account × Risk%) ÷ (Stop distance × value per unit)
Worked example: forex
$1,000 account, 1% risk = $10. EUR/USD setup, stop 25 pips. Mini-lot pip value ≈ $1, so $10 ÷ (25 × $1) = 0.4 mini lots = 0.04 standard lots. Feels small; survives everything.
Worked example: gold
$1,000, 1% = $10. XAU/USD stop $4.00 away. A 0.01 lot (1 oz) loses $1 per $1 move → $4 risk per 0.01. $10 ÷ $4 ≈ 0.02–0.03 lots. Gold's volatility punishes anyone who sizes it like a forex pair.
The rules around the formula
- Recalculate every trade — stop distance changes, so size must.
- Risk a fixed percentage, not fixed lots; the account then breathes with performance, shrinking risk automatically in drawdowns.
- Never resize mid-trade to "give it room" — that is re-rolling a decided bet.
- Cap total open risk (e.g. 3% across all positions), since correlated pairs lose together.
The calculator on our homepage — and inside the app's journal — runs this exact math with instrument presets. Type before you trade; the discipline is the point.
Education only — not financial advice. Trading carries risk of loss; never trade money you cannot afford to lose.
