Position sizing is how you control risk on every trade. Get it right and no single trade can hurt you badly. This guide explains lots, and how to choose a size that fits your account.
What is a lot?
A lot is a standard unit of trade size. In forex, a standard lot is 100,000 units of the base currency, a mini lot is 0.1 (10,000 units), and a micro lot is 0.01 (1,000 units). Smaller lots mean each pip of movement is worth less, and your risk is smaller.
Why position size matters more than being right
You can be right often and still lose if your sizes are too big, because one oversized loss can wipe out many small wins. Sizing sensibly is what keeps you in the game long enough to let a good strategy work.
How to size a position
- 1
Define your position risk
Choose a small amount you’re willing to lose on the trade, often a small percentage of your account.
- 2
Set your stop distance
Decide where your stop loss goes, in pips, based on your plan.
- 3
Work out the size
Choose a lot size so that if the stop is hit, you lose only your chosen risk amount. Smaller stop or smaller size means less risk.
A simple rule of thumb
Many traders set a conservative position-risk limit. Keeping each risk small means a losing streak is survivable and no single trade defines your account.
- A lot is a unit of trade size: standard, mini or micro
- Smaller lots mean smaller risk per pip
- Size each trade so a stop-out costs only your planned risk
- Consistent, small risk beats occasional big bets
This guide is educational only and is not investment advice or a promise of profit. Trading involves significant risk and may result in the loss of your capital.