Position Size Calculator
Determine your ideal amount of risk with the position size calculator. This tool allows you to quickly figure out how much to risk on a trade relative to your account size, stop loss, and risk percentage. Simply enter the information below and click Calculate to have the tool display the ideal amount you should risk and what that translates to in lot size.
Note: Gold and silver aren’t supported due to the pip difference between brokers.
How To Use This Tool
Calculating the right position size is a big part of practicing sound risk management. Position size is one of the few things we control, so it’s important to keep it in check to keep the risk as low as possible. The tool makes this easy by quickly calculating the ideal size trade for multiple lot sizes based on account balance and stop-loss risk and then showing what trade that translates to in lots.
To use the tool, follow these 5 simple steps:
1. Select the currency of your trading account.
2. Choose which pair you plan to trade.
3. Enter the current balance of your trading account.
4. Put in what percentage of your account you plan to risk on the trade – 1 – 3% is standard, though it depends on how big your trading account is.
5. Enter the size of your stop loss in pips.
With that done, the tool will automatically calculate the information and reveal the ideal position size along with the amount at risk.
Understanding Position Size And Why It’s So Important
Position size is a key component to risk management – how we safely manage our money to ensure small losses and big wins. Risk management, is of course, hugely important in forex. It’s one of the only things – along with entry and exit – we control and plays a large part in whether or not we make money and ultimately become successful.So what is position size, and how does it work?Quite simply, position size is the size of the trades you place in relation to your account balance and risk profile – how much you’re comfortable with risking.Trade size has a direct effect on making money. It determines how much profit you make, how much you lose when things don’t go to plan, and also influences the size of your stop loss. Getting it right and trading with the correct size is often the difference between making and losing a lot of money, which is why position size is so important to understand.
Calculating Position Size
Position size is always calculated according to the same 3 factors, most of which you’ll recognize as basic components of risk management.These factors are all linked together – risk tolerance is based on account size, for example – so you can’t determine position size correctly without taking them all into account during the calculation.Here’s a quick overview of the 3 factors:
1. Account Size
How much money you have in a trading account is easily the biggest factor in determining position size, for one simple reason:The more money you have, the bigger the trades you can place.While having a big account means you can trade at a higher size, simply placing big trades because you have a large account is a mistake traders make far too often. Always use the calculator to work out the ideal size relative to your account to stay on the safe side and not risk more than necessary.
Your personal risk tolerance is the maximum amount you’re okay with losing on a trade. This is determined by the size of your account, which itself is based on the position size – notice how they’re all linked together?
Risk tolerance is different for everyone, but the most common is to risk between 1 – 2% of your account on each trade. Risking that much means you have to lose over 100 trades in a row to blow your account – even the worst trader in the world would have a hard time with that. For higher time-frames like the daily, 3 – 4% is okay due to the low number of trades, but it’s still better to keep things on the low side.
How far away your stop-loss is from the entry price also plays a big role in determining position size.Strategies with small stops allow you to trade higher sizes, as you have to cover a smaller distance for where price could potentially move to before reversing. Strategies with large stops, such as those used on the higher timeframe, force you to use a lower size because of the larger distance that must be covered.