How position sizing works
Professional traders decide how much money they are willing to lose before they decide how big the trade is. The lot size is then worked backwards from that risk and the distance to the stop loss.
How much should you risk per trade?
Many experienced traders risk between 0.5% and 2% of their balance on a single trade. At 1% risk, ten losses in a row still leave about 90% of the account. At 5% risk, the same losing streak removes around 40%.
Tips
- Place the stop loss where the trade idea is proven wrong, then size the position. Never move the stop to fit a bigger lot.
- Round the result down to the lot step your broker allows (usually 0.01).
- Check margin with the margin calculator before opening large positions.
Frequently asked questions
What lot size should I use for a $100 account?
With 1% risk ($1) and a 20-pip stop on EUR/USD, the size is 0.005 lots. That is below the 0.01 minimum at many brokers, so small accounts need a broker with nano (cent) lots, a wider stop, or a slightly higher risk per trade.
What is the 1% rule?
It means never risking more than 1% of your account balance on a single trade. It keeps drawdowns small and gives you room to survive losing streaks.
Does leverage change my lot size?
No. Leverage only changes the margin needed to open a trade. Your risk depends on lot size and stop loss distance.
Can I use this for gold?
Yes. Choose XAU/USD. It uses a 100-ounce contract and a 0.01 price step as one pip.