Position Sizing

What is Position Sizing?

Position sizing is the calculation used to choose the trade size so the estimated loss at your planned stop loss matches the USD amount you chose before entry. The size must also fit the exact rules for your account and prop-firm program.

The Four Inputs

1. Planned USD risk: the maximum loss you plan for this trade. See risk per trade.
2. Entry: the price where you expect to open the trade.
3. Stop distance: the distance between the entry and the planned stop.
4. Estimated loss per unit: what one unit, contract, or 0.01 lot would lose if the stop filled at the expected price.

Position size = planned USD risk ÷ estimated loss per unit at the stop

When you have these inputs, use the forex position size calculator. The step-by-step position-size guide shows the complete XAUUSD and EURUSD calculations.

Fictional XAUUSD Example

You plan a maximum loss of $50. After choosing the entry and stop, your platform's order ticket estimates that each 0.01 lot would lose $10 if price reached that stop.

1. $50 ÷ $10 = 5 units
2. 5 × 0.01 lot = 0.05 lot

The calculated size for this fictional ticket is 0.05 lot. The $50 amount is an example, not a recommendation.

Check the Platform Details Before Using the Result

Do not assume that the same price move has the same value on every instrument or platform. Check the contract specification, tick or price-move value, account currency, and any currency conversion shown for your exact order.

Spread, commission, slippage, or a price gap can make the realised loss different from the estimate. A stop is part of the calculation, but it does not guarantee the exact exit price.

Prop-Firm Limits Are Separate Checks

After calculating the trade size, compare the planned loss and any open exposure with the current daily drawdown limit and overall drawdown limit for your exact program and account stage. Position sizing does not replace those checks.

The forex and prop-firm risk-management guide explains how the size, stop, open exposure, and firm limits fit together.