Lots and position size: how to risk only 1%

The most common way new traders blow an account isn't a bad strategy. It's trading too big. Position sizing fixes that: you decide how much you're willing to lose first, then pick a lot size to match.

The 3 numbers you need

• Account balance, e.g. $5,000
• Risk per trade as a percent. Many traders use 0.5% to 1%.
• Stop loss in pips: how far price can go against you before you get out.

The formula

Lot size = (Balance × Risk %) ÷ (Stop loss in pips × Pip value per lot)

Worked example

Balance $5,000, risking 1%, 25-pip stop on EUR/USD (pip value $10 per lot):

• Money at risk: $5,000 × 1% = $50
• Cost per lot if stopped out: 25 × $10 = $250
• Lot size: $50 ÷ $250 = 0.20 lots

If the trade hits your stop, you lose about $50, not your whole week.

Why 1% matters

Losing streaks happen to everyone. At 1% risk, ten losses in a row costs about 10% of your account. At 10% risk, the same streak can wipe out most of it. Small risk keeps you in the game long enough to learn.

Prop firm challenges make this even more important, because a daily loss limit can end your challenge in one bad day.

Use the position size calculator →

For learning only, not financial advice. Trading on margin is high risk.