In short
- First decide how much you can lose, then calculate the position size.
- Size = amount at risk ÷ (distance to SL × value of a point per lot).
- 1% of capital per trade lets you survive a long losing streak; 5% usually does not.
Loss first, position second
Most beginners start with "how much can I make". Professionals start with "how much can I lose if I am wrong". That amount — risk per trade — decides whether you survive the losing streaks that will come.
The formula
Position size (lots) = amount at risk ÷ (distance to stop-loss × value of a 1-point move per lot).
Gold example: a 10,000 USD account, 1% risk = 100 USD. Entry 4,150, stop-loss 4,140 — 10 points. On gold 1 lot is usually 100 ounces, so a 1 USD move is 100 USD per lot. Loss at the stop with 1 lot: 10 × 100 = 1,000 USD. Size: 100 ÷ 1,000 = 0.10 lots.
The position size calculator does this for you. Check the point value in your broker’s contract specification — it differs between brokers, especially on indices.
How much to risk
There is no single number for everyone, but the arithmetic is merciless. At 1% per trade, 10 losses in a row take about 10% of the account. At 5% — about 40%, and to recover 40% you need to make 67%. That is why 0.5–1% is a common choice to start with. The risk-of-ruin simulator shows how often an account loses half under different settings.
Common mistakes
- Moving the stop-loss further away as price gets close — the amount at risk stops being real.
- The same position size with different stop distances — the risk jumps from trade to trade.
- Calculating risk from profits instead of capital.
Remember
According to ESMA, most retail accounts trading CFDs lose money. Risk management does not change a strategy’s edge — it decides whether you survive long enough to find out if there is one.
Questions
Is 1% a mandatory rule?
No. It is a common starting point because it lets you survive long losing streaks. More important than the exact number is that it is fixed and calculated before you enter.
What if the result is below the minimum lot?
Then the trade with that stop is too big for your account — reduce the risk, find a closer stop or skip the trade.