Position sizing and risk per trade

Start with risk, not reward

Professional risk management starts with a fixed percentage of your account per trade. Many traders use somewhere between 0.5% and 2%. On a $10,000 account, risking 1% means a losing trade costs $100.

The position size formula

Position size (lots) = amount at risk ÷ (stop-loss in pips × pip value per lot).

Example: you risk $100 with a 25-pip stop on EUR/USD, where one standard lot is worth about $10 per pip. $100 ÷ (25 × $10) = 0.4 lots.

Why small risk keeps you in the game

Losing streaks are normal, even for good strategies. Ten losses in a row at 1% risk leaves you down about 10%. The same streak at 5% risk leaves you down about 40% — and needing a 67% gain just to get back to where you started.