CandleGPTPosition size: how many lots to trade for your stop
Position size decides how much you lose when your stop is hit. It is the most important setting in trading, and it takes one line to work out. Here is the formula, examples on EURUSD and gold, and the mistakes to avoid.
The formula
Size (lots) = amount you accept to lose ÷ (stop distance × value of one point for 1 lot)
Three things are enough:
- The amount at risk: your balance × your risk percentage. With $5,000 and 1%, that is $50.
- The stop distance: between your entry and your stop, in pips or points.
- The value of one pip for 1 lot: it depends on the market and your broker.
Pip value by market
| Market | One pip | Value for 1 standard lot (approximate) |
|---|---|---|
| EURUSD, GBPUSD, AUDUSD | 0.0001 | $10 |
| USDJPY | 0.01 | About $6 to $7 (depends on the rate) |
| Gold (XAUUSD) | $0.10 | $10 (1 lot = 100 ounces, usually) |
| Indices (NAS100, US30, GER40) | 1 point | Varies a lot by broker |
These are orders of magnitude. The exact value is in your broker's contract specification (right-click the symbol in MetaTrader, then "Specification"). On indices and some cross pairs it varies a lot between brokers.
Two examples
EURUSD
$10,000 account, 1% risk ($100), 25-pip stop. Size = 100 ÷ (25 × 10) = 0.40 lot. If the stop is hit, you lose about $100, plus spread and commission.
Gold
$5,000 account, 1% risk ($50), entry at 2650, stop at 2645: a 5-dollar distance, or 50 pips of 0.10. Size = 50 ÷ (50 × 10) = 0.10 lot.
With 1 lot on the same trade, the loss at the stop would have been $500: 10% of the account on a single trade.
How much to risk per trade?
Many traders keep to 0.5% to 2% of the account per trade. The reason is maths: losing streaks happen to everyone.
| Risk per trade | After 5 losses in a row | After 10 losses in a row |
|---|---|---|
| 1% | −4.9% | −9.6% |
| 2% | −9.6% | −18.3% |
| 5% | −22.6% | −40.1% |
| 10% | −41.0% | −65.1% |
And climbing back is harder than falling: after −40%, you need +67% to get back to where you started. On a prop firm challenge the loss limit is often 5% a day and 10% overall: at 5% risk per trade, two losses are enough to lose it all.
Common mistakes
- Choosing the size before the stop. "1 lot as usual", then a stop wherever it fits. It is the other way round: the stop goes where the idea is wrong, and the size follows.
- Raising size after a loss to win it back. For most traders, it is the most expensive habit.
- Forgetting costs. Spread, commission and swap add to the loss at the stop.
- Ignoring slippage on news days: the stop can be filled further away (see the news guide).
CandleGPT does this for you, in MetaTrader
CandleGPT works out the size for your risk on every setup and every trade check, using your broker's real tick value. And if you open a position that is too big, the alert shows on your MetaTrader chart: money at risk and percentage of the account.
See plansTrading involves a high risk of losing money. This guide is educational: it is not investment advice and does not tell you what to buy or sell. Past results do not predict future results.