How position size is calculated
Three numbers decide the size of a trade, and only three:
- How much you are willing to lose — your balance multiplied by your risk percent.
- How far the stop sits from your entry — the distance in price, not in percent.
- What one unit is worth — for most instruments, one unit moves one currency unit per point of price.
Put together:
risk amount = balance × risk %
distance = | entry − stop |
position = risk amount ÷ distance
A $10,000 account risking 1% is risking $100. If your entry is 1.0850 and your stop is 1.0800, the distance is 0.0050. Dividing gives 20,000 units — in forex terms, 0.2 of a standard lot.
The order of the inputs matters more than it looks. The stop comes from the chart, and the size comes from the stop. Choosing a size first and then placing a stop where it "feels safe" is the same decision made backwards, and it is the most common way a plan quietly becomes a gamble.
Why the answer is in units, not lots
The calculator returns units of the instrument — shares, coins or base currency — because that is what profit and loss is actually computed from:
P&L = (exit − entry) × units
Lots are a broker convention layered on top. To convert:
| Instrument | One unit | Convert from units |
|---|---|---|
| Forex standard lot | 100,000 base currency | divide by 100,000 |
| Forex mini lot | 10,000 | divide by 10,000 |
| Forex micro lot | 1,000 | divide by 1,000 |
| Stocks | 1 share | no conversion |
| Crypto | 1 coin | no conversion |
Futures work differently: a contract is a fixed size with a fixed tick value, so you size in whole contracts and the distance is measured in ticks rather than price.
What the number does not include
A position size calculator answers one narrow question honestly, and it is worth knowing what sits outside it:
- Slippage. The risk figure assumes your stop fills at your price. In fast markets it does not, and the real loss is larger.
- Spread and commission. Both come out of the same account, and on short-distance scalps they can be a meaningful share of the risk.
- Gaps. A stop is an instruction, not a guarantee. Over a weekend or a news release, price can open past it.
- Correlated positions. Three long trades on EUR pairs are not three 1% risks. They are closer to one 3% risk wearing three names.
The last one catches experienced traders more often than beginners.
The number most traders get wrong
Not the size — the percent. Risking 1% per trade means a run of ten losses costs roughly 10% of the account, which is recoverable. Risking 5% means the same streak takes about 40%, and getting back from a 40% drawdown needs a 67% gain.
The arithmetic is not an opinion about how confident you should be. It is what a losing streak costs, and losing streaks arrive regardless of confidence.