How to calculate position size in forex, gold and indices (with examples)

Position size isn't picked by eye and it isn't always the same. You calculate it for every trade from three numbers: how much you want to risk, where your stop is and how much each pip (or point) of the asset is worth. That way a trade with a 10-pip stop and another with a 40-pip stop risk exactly the same.

The formula

Lots = money at risk ÷ (stop distance × pip value per lot)

Money at risk is your balance times the percentage you risk (for example 1%). Stop distance is measured in pips (forex) or points (gold, indices). Pip value depends on the asset and your broker's contract size.

EURUSD example

• $10,000 account and 1% risk → you risk $100.
• 20-pip stop. On EURUSD, with a USD account, 1 standard lot is worth about $10 per pip.
• Lots = 100 ÷ (20 × 10) = 0.5 lots. If the stop is hit, you lose $100 (plus commission).
• With a 40-pip stop it would be 0.25 lots: the same risk with more room.

Gold example (XAUUSD)

At most brokers, 1 lot of gold is 100 ounces: every dollar the price moves is $100 per lot. With a $5 stop (say from 2,400 to 2,395), the risk per lot is 5 × 100 = $500. To risk $100: 100 ÷ 500 = 0.2 lots.

Indices and pairs that don't end in USD

• Indices (NAS100, US30, GER40…): the value per point varies by broker ($1, $10 or $20 per point and lot). Check the contract specification before calculating.
• Pairs like USDJPY: a pip is worth 1,000 yen per lot; in dollars, about 1,000 ÷ price (at 150, about $6.70). That's why the same stop in pips doesn't risk the same on every pair.
• EUR account: the math is the same, but convert the pip value to euros.

The costliest mistakes

• Always using the same lot size: with different stops, your real risk changes every trade.
• Rounding up: if you get 0.47 lots, use 0.47 or 0.45, never 0.5.
• Forgetting commission and spread: on very tight stops they eat a big part of the risk.
• Sizing up to win back a loss: the fastest way to fail a prop firm challenge.

Do it in seconds

The position size calculator does it for you for forex, gold and indices, free and without signing up. And in the Katanith journal every trade stores its risk and its result in R, so you see whether you're really risking what you think: see the demo.