Before the trade: understand risk and position size
Learn how balance, stop distance, pip value, and lot steps fit together with a simple worked example.
Put it into practice
Try the tool Position Size Calculator · Free, with local processing.
The short answer
Position size connects a chosen money-at-risk budget to a stop distance and a pip value. It does not decide whether a trade is suitable.
Start with the assumptions. The same lot size can represent very different risk on a different instrument or account currency.
Start with a money amount
A position-size calculator translates a chosen risk budget into a possible position size. It cannot choose the right risk level for you. For an educational example, a 1,000-unit account and a user-selected 1% risk assumption give a 10-unit risk budget.
Connect the stop distance to pip value
Suppose the stop is 20 pips from entry and one standard lot has a value of 10 account-currency units per pip. One lot would have an estimated 200-unit exposure over that distance. Dividing the 10-unit budget by 200 gives 0.05 lots. Try these inputs in the Position Size Calculator.
A worked example you can check
| Input or step | Example |
|---|---|
| Account balance | 1,000 account-currency units |
| User-selected risk | 1%, giving a 10-unit budget |
| Stop distance | 20 pips |
| Pip value for one standard lot | 10 account-currency units per pip |
| Exposure for one lot | 20 × 10 = 200 units |
| Estimated position | 10 ÷ 200 = 0.05 lots |
These figures illustrate the formula. The 1% input is an example, not a risk recommendation.
Check currency and contract assumptions
A pip value is not always 10 in your account currency. Use the Pip Value Calculator with the right contract units, pip size and conversion rate. Verify specifications with your broker. OANDA explains pip conventions, including the common difference for JPY-quoted pairs.
Round down, then check the minimum
The calculator rounds down to your entered lot step so rounding does not intentionally increase the estimated risk. A zero result can mean that even the smallest step exceeds the budget. A broker may also impose a separate minimum size.
Before you use the result
- Check whether the instrument uses the pip size you assumed.
- Confirm your account currency and pip-value conversion direction.
- Check both the broker lot step and minimum order size.
- Account for fees and execution uncertainty separately.
An estimate is not a loss guarantee
Spreads, fees, swaps, gaps and slippage can change the outcome. A stop order does not guarantee a fill at its requested price. Margin measures a deposit requirement, not the maximum possible loss. These tools are educational and do not recommend a trade.
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