// HOW-TO GUIDE
10 min READ
How to Calculate Position Size
If you ask a beginner "how much are you risking?", they say "£50." If you ask a pro, they say "1%." This guide teaches you the math of professional risk management.
01
Determine Your Risk Amount
Choose a fixed percentage (e.g., 1%) of your account balance. This is your "Risk at Risk".
02
Use the Position Size Formula
Lot Size = (Account Risk Amount) / (Stop Loss Distance in Pips * Pip Value). This ensures that no matter where your stop is, you only lose 1%.
Common Mistakes to Avoid
- /Using the same lot size for every trade
- /Ignoring pip value differences between currency pairs
The Drawdown Way
We built a free tool to do this math for you in 2 seconds.
Questions & Answers.
What is a pip value?
It is the dollar/pound value of a single pip move. For most pairs on a standard lot, it is $10.
Ready to trade the truth?
Stop guessing. Start learning with Drawdown and master the business of managing risk.
Join Drawdown Free