Position sizing
Deriving the number of lots/contracts from the money you accept to risk per trade and the stop distance. The core of risk management.
Formula: lots = (account × risk %) / (stop distance × pip/tick value). $10,000 account, 1% risk, 20-pip stop, $10/pip → 0.5 lots.
A common mistake: picking the lot size first and then fitting the stop to it. The right way is the reverse. The Tools → Position Size calculator does this for you.
Related terms
Where it appears in the guides
Guides whose text uses this term; most frequent first.
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