Trading with the proper position size on each trade is key to successful forex trading. Position size is how many lots (micro, mini or standard) you take on a particular trade. The ideal position size is based on both account size, the setup of each trade, and the pair being traded. Based on these factors, the ideal position size could be different for each trade. Learn how to calculate your ideal position size in a few easy steps.

Position size is a key component in successful forex trading. Risk too much and a few losing trades can wipe out your account. Even best traders have losses. If your position size is too small, then your account won’t grow and you won’t meet your financial goals. Your performance will be less than what it could be if you were trading with the ideal position size.

Forex Position Sizing In 3 Steps

• Determine how much of your account you want to risk on each trade, in a percent. It’s recommended traders don’t risk more than 1% of their account per trade, or 2 to 3% maximum. Based on your account size, this percentage lets you know the dollar amount you can risk. Assume you have a $5,000 account, and are willing to risk 1% per trade. 1% of $5,000 is $50, so you can risk $50 per trade. Do this calculation for your current account balance, then proceed to the next step.
• Next, determine the pip risk on the trade you are considering. The pip risk is the difference between your entry price and your stop loss order price. If you use the same pip risk all the time–for example you always place a 10 pip stop when day trading–then this step is easy because you already know the number of pips at risk. If you adjust your stop loss for market conditions (like I do), then your pip risk may vary from one trade to another. Once you know the pip risk of your trade, move to the next step.
• Now determine your ideal position size using the above data. Use the formula:

$ at Risk / (Pip Risk x Pip Value) = Position size in lots

“$ at Risk” is the amount from step one.

“Pip Risk” is the value from step two.

“Pip Value” is a known variable; for example, each pip is worth $1 in the EURUSD when trading a mini lot.

Plug in the data to find how many Lots you can take (position size) if your stop loss is 10 pips.

$50 / (10 pips x $1) = 5 mini lots

Or for a trade with 38 pips of risk.

$50 / (38 pips x $1) = 1.3 mini lots (or 13 micro lots)

We know the position size is in mini lots because the pip value we used in the calculation is for a mini lot. To calculate the position in micro lots, use the micro lot pip value.

$50/ (10 pips x $0.10) = 50 micro lots

Input your own dollars at risk, pip risk, and pip value into the formula to determine the proper forex position size on each trade.

Having the proper position size is key to forex trading success. Risk too much on each trade, and you will deplete your account in a hurry with just a few losing trades. Risk too little and your account won’t grow. Use the formula to make sure you have the ideal position size for your account size and the trade you’re taking.