The short answer
Decide how much money you are willing to lose on a trade first, then let that number set the lot size. The math is: lot size = (risk in money) divided by (stop distance in pips times pip value). Size follows from your risk, never the other way round.
Most blown accounts are not caused by bad analysis. They are caused by a position that was too big for the stop. Get sizing right and a string of losers still leaves you well inside your limits. Get it wrong and a single trade can take you to the edge.
The position-sizing formula
There are three inputs, and you set them in this order.
Risk per trade: the amount of money you accept losing if the stop is hit, usually a small percentage of your balance.
Stop distance: how far, in pips, your stop loss sits from your entry. This comes from the chart, not from how big you want the trade to be.
Pip value: how much one pip is worth per lot for the instrument you are trading. This is shown on your dashboard and in your platform.
Then size the trade.
The formula
Lot size = risk in money / (stop distance in pips x pip value per lot)
A wider stop means a smaller lot. A tighter stop allows a larger lot for the same risk. The money you risk stays fixed either way.
Picking your risk per trade
Your risk per trade is the dial that protects you from a losing streak. Keep it small enough that several losses in a row cannot reach your daily drawdown or your maximum drawdown.
A simple way to think about it: if your daily drawdown gives you a fixed amount of room before the day stops, and you risk a small fraction of your balance per trade, you can take many losses before you ever approach that line. Risk a large fraction and two or three bad trades end your day, or your account. Your exact drawdown figures are shown on your dashboard and on each product page, since they differ by product.
Daily drawdown resets at 00:00 UTC, so a controlled risk per trade also means a single rough session does not have to follow you into the next day.
Respecting single-trade loss caps
On instant accounts there is a hard ceiling on what any one trade is allowed to lose, built into the rules so an oversized position cannot slip through. Your position size must keep the worst case under that cap.
Account | Single-trade loss cap |
Instant | 2% |
Instant Pro | Tighter than Instant (see your product page or dashboard) |
Instant 24h | 1% |
If your sizing math ever produces a worst-case loss above the cap, the lot is too big. Lower it until the stop loss times the position stays under the limit. Treat the cap as the absolute maximum, not your normal trade size. A sensible risk per trade usually sits well below it.
A worked example
Say you have a $100,000 account and you decide to risk 0.5% on a trade, which is $500. Your chart tells you the stop should sit 50 pips away. Suppose the pip value works out to $10 per standard lot for the instrument (your dashboard shows the exact figure).
Run the formula: $500 / (50 pips x $10) = $500 / $500 = 1 lot. If you hit the stop, you lose $500, exactly the amount you chose, and far below any single-trade cap.
Now widen the stop to 100 pips for the same $500 risk: $500 / (100 x $10) = 0.5 lots. Same money at risk, half the size, because the stop is twice as far. That is the whole idea. You move the lot size, not your risk.
One more thing about leverage
Leverage is 1:100, so even a small lot controls a large notional position. That is exactly why you size from your risk and your stop, not from how much the account lets you open. Your stop loss, not your margin, is what keeps a single trade from doing real damage.
Related
Risk management basics: protecting your account first
What is leverage, and why 1:100?