Module 6: Risk Management
Position Sizing
6 min read
Position sizing turns your chosen risk into the correct lot size for each trade.
The formula
Lots = (account balance × risk %) ÷ (stop-loss in pips × pip value per lot).
The stop-loss location should come from your analysis first. Then the position size adjusts so that the money at risk stays constant.
Example: Worked example
$10,000 account, 1% risk = $100. Stop-loss 25 pips on EUR/USD (≈$10 per pip per lot). Lots = 100 ÷ (25 × 10) = 0.40 lots.
Key takeaways
- Decide the stop first, then the size.
- Keep money at risk consistent.
- Use the position size calculator every time.
Educational content only, not financial advice. Trading forex and CFDs involves significant risk of loss.