How to calculate lot size in forex, step by step

Lot size is the most important risk decision of every trade: the same price move wins or loses twice as much if you double the size. This guide teaches you to always calculate it from what you are willing to lose, not from what “feels” right.

The right order: stop first, lot second

A very common mistake is choosing the lot first (“today I trade 0.5”) and placing the stop wherever it fits. It must be the other way around: the stop goes where the market proves your idea wrong (below support, above resistance) and the lot is adjusted so that loss is the one you decided on.

Step 1: decide how much you are willing to lose

Multiply your balance by your risk percentage. With a 10,000 USD account and 1% risk, you risk 100 USD per trade. If the trade goes wrong, you lose exactly that amount, no more.

Step 2: measure the stop distance in pips

Say you buy EUR/USD at 1.0850 and your stop is at 1.0800: that is 50 pips. Remember that on yen pairs one pip is 0.01 instead of 0.0001.

Step 3: calculate the pip value

On EUR/USD with a USD account, one standard lot (100,000 units) is worth 10 USD per pip. In general: pip value per lot = contract size × pip size, converted into your account currency.

Step 4: apply the formula

Lots = risk ÷ (stop in pips × pip value per lot). With the numbers above: 100 ÷ (50 × 10) = 0.20 lots. If your stop is hit, you lose 0.20 × 50 × 10 = 100 USD.

Example with USD/JPY

One lot of USD/JPY is 100,000 USD and the pip is 0.01 yen, i.e. 1,000 JPY per pip. If USD/JPY trades at 150, that is 1,000 ÷ 150 ≈ 6.67 USD per pip. With 100 USD risk and a 40-pip stop: 100 ÷ (40 × 6.67) = 0.375 lots, rounded down to 0.37.

Example with gold (XAU/USD)

One lot of gold is 100 ounces, so each dollar of movement is worth 100 USD per lot. With a stop 5 dollars from entry, each lot loses 500 USD; to risk 100 USD you would trade 0.20 lots. Always check your broker’s specifications, because the definition of a “pip” on metals varies.

Common mistakes

Rounding the lot up (you risk more than planned), forgetting to convert the pip value into the account currency, using the wrong balance (real equity is better) and moving the stop after opening without recalculating the lot.

Use our lot size calculator to do it in seconds and check each step.

Educational content, not financial advice. Risk disclosure