- Calculate risk amount from an account and percentage.
- Convert entry-to-stop distance into units.
- Spot when a minimum order size changes the plan.
The core formula
First calculate the cash amount you are willing to risk. Then calculate the loss per unit if the invalidation is reached. Divide the first number by the second. If fees, spread or conversion affect the product, reserve room for them rather than pretending the arithmetic is exact.
The calculator on this site uses the same simple model for learning. Real contracts can have point values, minimum sizes, tick values or different settlement rules, so verify the instrument specification.
A worked example
Imagine an account of 2,000 and a planned risk of 0.5%. The cash risk is 10. If an entry is 50 and the stop is 48, the distance is 2 per unit. The simple size is 5 units because 10 divided by 2 equals 5.
If the venue requires a minimum of 10 units, the theoretical size cannot be used as-is. You could reduce the planned risk, choose a different instrument or skip the trade. A minimum size is a constraint, not a reason to ignore the risk plan.
Check the hidden assumptions
Does the product trade in whole units? Is the quote in your account currency? Does one contract represent one share, one coin or a multiplier? Will the stop execute during a gap? These questions can change the cash result.
For leveraged products, calculate the notional value separately from the cash risk. A smaller margin requirement can create a large exposure. The position-size number is only useful when you understand what one unit means.
- Unit or contract multiplier
- Currency conversion
- Fees and funding
- Minimum size and increments
- Liquidity and gap behaviour
The same risk, different stop
With 100 of cash risk, a 2-unit stop distance gives a 50-unit position. A 5-unit stop distance gives a 20-unit position. The wider stop does not automatically mean more risk when the size is adjusted.
Carry these four ideas forward.
- Calculate cash risk first.
- Use absolute entry-to-stop distance.
- Check unit and contract rules.
- Round down when the product requires increments.
Three questions before the next tab.
Choose the answer that best matches the lesson. This is a memory check, not a market signal.
Before you move on
Does position sizing guarantee the planned loss?+
No. Execution gaps, slippage, fees and product mechanics can change the result. It is a planning estimate.
Should I size from the take-profit target?+
The size should primarily reflect the risk at invalidation. A target can help evaluate the trade, but it should not hide an oversized position.
Can I use this for forex?+
The simple calculator is educational. Forex sizing needs pip value, lot conventions and account-currency conversion, which is why the pip calculator is separate.