Glossary · Risk & money management
Position sizing
Also called: position size
Choosing how many lots to trade so that a stop-out costs a fixed amount of your account.
Lot size = (account × risk %) ÷ (stop in pips × pip value per lot).
In practice
Account $10,000, risk 1% ($100), stop 50 pips on EUR/USD at $10 per pip per lot. Position size = 100 ÷ (50 × 10) = 0.20 lots.
Using the same lot size on every trade regardless of stop distance. A wide stop then risks far more than a tight one.
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