In short. Lots = risk in money / (stop loss in pips × pip value per lot). First decide how much you are willing to lose on the trade, then place the stop where the chart says — and only then calculate the size. For EURUSD on a $10,000 account with 1% risk and a 20-pip stop that is 0.5 lots. The lot size calculator does it for you.
The formula
Lots = Risk in money / (Stop loss in pips × Pip value per lot)
- Risk in money — balance × risk percentage / 100. With a $10,000 balance and 1% risk that is $100.
- Stop loss in pips — the distance from entry to stop. For most pairs a pip is 0.0001, for yen pairs 0.01.
- Pip value per lot — contract size × pip size, converted into the account currency. A standard forex lot is 100,000 units of the base currency.
Step by step
- Set the risk per trade as a percentage of the balance and convert it into money.
- Place the stop loss where the trade idea is invalidated and measure the distance in pips.
- Find the pip value per lot for the instrument in your account currency.
- Divide the risk by the stop times the pip value.
- Round the size down to your broker's step — usually 0.01 lots.
Examples
| Instrument | Risk | Stop | Pip value per lot | Size |
|---|---|---|---|---|
| EURUSD, USD account | $100 | 20 pips | $10 | 100 / (20 × 10) = 0.5 lots |
| GBPUSD, USD account | $100 | 40 pips | $10 | 100 / (40 × 10) = 0.25 lots |
| USDJPY at 150, USD account | $100 | 30 pips | ¥1,000 / 150 ≈ $6.67 | 100 / (30 × 6.67) ≈ 0.5 lots |
| EURGBP with GBPUSD at 1.25, USD account | $100 | 25 pips | £10 × 1.25 = $12.5 | 100 / (25 × 12.5) = 0.32 lots |
| XAUUSD (100 oz), USD account | $100 | $5 of price = 50 pips of $0.1 | $10 | 100 / (50 × 10) = 0.2 lots |
Compare rows 1 and 2: same risk, a stop twice as wide — half the size. That is the point: the position size adapts to the stop, not the other way round.
When you need an exchange rate
Pip value is calculated in the quote currency — the second one in the pair. If it differs from the account currency, convert it at the current rate:
- USDJPY on a USD account: ¥1,000 divided by the USDJPY rate;
- EURGBP on a USD account: £10 multiplied by the GBPUSD rate;
- EURUSD on a EUR account: $10 divided by the EURUSD rate — about €9.26 at 1.08.
Pips and points
With five-digit quotes the price moves in steps of 0.00001 — a point. A pip is ten points. MetaTrader shows distances in points, so a «200 points» stop is 20 pips. Mixing up the units makes the size ten times wrong.
Common mistakes
- The same lot for every trade. With a fixed size every trade carries a different risk: a wide stop costs more than a tight one.
- Rounding up. 0.57 lots becomes 0.6 — and the stop costs more than planned. Round down.
- Forgetting the rate. On crosses and non-USD accounts the pip value is not $10.
- Commission and spread. They add to the loss when the stop is hit. On a commission account, include it in your risk.
- A stop that fits the size. Stop from the chart first, size second — not the other way round.
How much to risk per trade
A common guideline is 0.5–2% of the balance per trade; why 1% is the usual choice is in «The 1% rule». Prop accounts add a daily loss limit and a maximum drawdown: with a 5% daily limit and 1% risk per trade, five losing trades in a row end the trading day. More in «Prop firm risk management».
Skip the manual math: the calculator and Davinchu
The lot size calculator sizes positions from balance, risk and stop for forex, gold and silver. Inside the terminal, the Davinchu risk manager for MetaTrader 5 — the T-Manager EA (the MT4 version is in development) — sizes positions from risk: you enter the risk in money or percent and set the stop, and the dashboard rule «Risk per trade, % (max)» blocks panel entries without a stop or with risk above the limit. More on the «MT5 risk manager» page. The trading journal then shows every trade's result in R — how many units of risk you made or lost; how to read R is covered in «Risk/reward ratio (RR)».