IC Markets
Lot size is the one calculation that decides whether a losing trade costs you a small planned amount or a large random one. It is a short formula, and once you have done it a few times you can estimate it in your head. This guide gives the formula, three worked examples, and the order to do it in.
The formula
| Step 1 | Risk amount = a fixed percentage of your account (commonly 1%) |
|---|---|
| Step 2 | Stop-loss distance in pips = entry to stop, measured on the chart |
| Step 3 | Pip value per lot = from a pip calculator, depends on the pair |
| Step 4 | Lot size = Risk amount / (Stop pips x Pip value per standard lot) |
The order matters. Decide the risk first, measure the stop from the chart second, and let those two produce the lot size. Never pick the lot size first and squeeze the stop to fit.
Worked example 1: EUR/USD
Account USD 5,000. Risk 1 per cent = USD 50. Your setup has a 25-pip stop. Pip value on EUR/USD is about USD 10 per standard lot. Lot size = 50 / (25 x 10) = 50 / 250 = 0.20 lots. If the stop is hit, you lose about USD 50, which is your 1 per cent.
Worked example 2: USD/JPY
Account USD 5,000. Risk 1 per cent = USD 50. Stop 25 pips. On USD/JPY the pip value is not USD 10; at a rate around 150 it is roughly USD 6.70 per standard lot. Lot size = 50 / (25 x 6.70) = 50 / 167.5 = about 0.30 lots. The larger lot size for the same risk is entirely because the pip is worth less on this pair, which is why you cannot use a flat USD 10 for everything.
Worked example 3: gold (XAUUSD)
Account USD 5,000. Risk 1 per cent = USD 50. Gold needs a wider stop; say 300 points (USD 3.00). On gold, 1 lot is 100 ounces, so a 1-point (USD 0.01) move is USD 1 per lot, meaning a USD 3.00 move is USD 300 per lot. Lot size = 50 / 300 = about 0.16 lots. The wider stop gold requires forces a smaller position, which is correct because gold is more volatile.
| Pair | Risk | Stop | Pip/point value per lot | Lot size |
|---|---|---|---|---|
| EUR/USD | USD 50 | 25 pips | ~USD 10 | 0.20 |
| USD/JPY | USD 50 | 25 pips | ~USD 6.70 | 0.30 |
| XAUUSD | USD 50 | 300 points (USD 3.00) | USD 300 per USD 3 move | 0.16 |
The quick method
- Risk amount in your notes app: 1 per cent of the current balance.
- Stop distance: read it off the chart for this specific setup.
- Pip value: from the pip calculator, or memorised for your two or three pairs.
- Divide: risk / (stop x pip value) = lot size.
- Sanity check with the lot size calculator before you place the trade.
Use the position size calculator and the lot size calculator to verify. They take your account currency, risk, stop and pair and return the lot size directly.
Chidi used to trade a fixed 0.10 lots on everything, which meant his risk swung from USD 15 on a tight EUR/USD stop to USD 90 on a wide gold stop, all on the same USD 1,200 account. He switched to calculating the lot size from a fixed USD 12 risk and the actual stop distance. His per-trade loss became consistent, and a run of four losers was a manageable drawdown instead of a scare.
If calculating the lot size feels like too much work before a trade, you are not ready to place it. The calculation is the difference between risk management and guessing. It takes ten seconds once you have the habit.
Risk amount divided by stop pips times pip value. That is the whole formula. The two mistakes are using a flat USD 10 pip value on pairs where it is different, and choosing the lot size before the stop. Decide what you are willing to lose, measure where the trade is wrong, and let the maths give you the size.
Frequently asked
How do I calculate forex lot size?
Lot size = risk amount divided by (stop-loss in pips multiplied by the pip value per standard lot). Decide the risk as a fixed percentage of your account, measure the stop from the chart, get the pip value from a calculator, then divide.
What is the pip value per lot?
About USD 10 per standard lot on pairs quoted to four decimals with USD as the quote currency, USD 1 per mini lot, USD 0.10 per micro lot. On pairs where USD is not the quote currency, such as USD/JPY, it depends on the current exchange rate.
Why is my lot size different on USD/JPY than EUR/USD for the same risk?
Because the pip is worth less on USD/JPY at typical exchange rates, roughly USD 6.70 per lot versus USD 10 on EUR/USD. For the same risk and stop distance, a lower pip value means a larger lot size.
How do I size a gold trade?
Gold is priced per ounce, and 1 lot is 100 ounces, so a USD 1.00 move is USD 100 per lot. Divide your risk amount by your stop distance in dollars times 100 to get the lot size. Gold's wider stop distance produces a smaller position than a currency pair.
Should I use the same lot size on every trade?
No. A fixed lot size means your risk changes with every stop distance and pair. Calculate the lot size from a fixed risk amount and the actual stop for each trade so the potential loss stays consistent.