How to Calculate Position Size in Forex
Position sizing connects account risk, stop distance, and pip value. Walk through the formula with examples and verify results with a calculator.
Forex position sizing answers one question: how many lots should you trade so that if your stop is hit, you lose only your planned risk amount?
Walk through the formula below, then verify with the position size calculator.
The core formula
Risk amount = account balance × risk percent. Lots ≈ risk amount ÷ (stop distance in pips × pip value per lot). Adjust for account currency and pair using accurate pip value — see pip value guide.
Worked example
Inputs
Account balance: $8,000
Risk per trade: 1% → $80
Stop distance: 25 pips
Pip value: $10 per pip per standard lot (EURUSD illustrative default)
Calculation
Lots ≈ $80 ÷ (25 × $10) = $80 ÷ $250 = 0.32 standard lots. Round down to your broker's minimum step.
Adjustments traders should make
Use pip value for the actual pair and conversion rate.
Include spread in effective stop distance for tight scalps.
Check margin requirement after sizing.
Connect sizing to reward planning
Position size controls loss; risk-reward ratio structures target relative to that loss. Neither guarantees profitability.
Key takeaways
Define risk percent before entry.
Measure stop in pips honestly — not wishful thinking.
Round lots down when in doubt.
Log planned vs actual slippage on exits.
Risks and common mistakes
Moving stops wider after sizing to avoid a loss.
Using maximum leverage as sizing input.