Lesson 16 of 20
Position sizing and the 1% rule
7 min read
Chapter checkpoints
0/3- Step 1 — choose your risk per trade
- Step 2 — measure the stop, then size the trade
- Risk across the whole account
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Position sizing is the mechanism that converts your risk rule into an actual number in the volume box. It is the single most useful calculation in trading, and it takes about fifteen seconds once you know it.
Step 1 — choose your risk per trade
- Beginners: 0.5–1% of account equity per trade.
- Experienced with a proven edge: up to 2%.
- Never more than 2%, regardless of how good the setup looks.
Step 2 — measure the stop, then size the trade
Volume = risk amount ÷ (stop distance in pips × pip value per lot). Work an example: a $3,000 account risking 1% is $30. A gold trade with a 60-pip stop, where a standard lot of gold is roughly $10 per pip, gives 30 ÷ (60 × 10) = 0.05 lots.
| Account | Risk 1% | Stop | Volume (EUR/USD) |
|---|---|---|---|
| $500 | $5 | 25 pips | 0.02 lots |
| $1,000 | $10 | 50 pips | 0.02 lots |
| $5,000 | $50 | 40 pips | 0.12 lots |
| $10,000 | $100 | 80 pips | 0.12 lots |
Wider stop, smaller size
A wide stop is not riskier than a tight one if you size correctly — it just means fewer lots. This frees you to place the stop where the chart says it belongs instead of where your lot size wants it.
Risk across the whole account
- Cap total open risk at around 3–5%, no matter how many positions.
- Correlated trades count as one trade: long EUR/USD, long GBP/USD and short USD/CHF is a single large short-dollar bet.
- Consider a daily stop — for example, stop trading after 2 losses or -3% on the day.
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