Calculate optimal position size
Correct position size is the difference between long-term success and a blown account. Calculate exactly how big your position should be.
Why does position size matter?
The biggest reason traders blow up their accounts is that they take positions that are too large. With correct position size, you survive even a series of losses, which is the prerequisite for being able to take profits over time.
The 1-2% rule
The general rule among professional traders is to never risk more than 1-2% of your account balance on a single trade. With 1% risk per trade, you can take 20 consecutive losses and still have 82% of your capital left.
How is it calculated?
The formula is: Position size = (Account balance × Risk%) / (Stop-loss in pips × Pip value). The result is the number of lots you should trade to keep within your risk budget.
Practical example
Account: 10,000 EUR. Risk: 1% = 100 EUR. Stop-loss: 30 pips. Pip value (1 lot): 10 EUR. Position size = 100 / (30 × 10) = 0.33 lots. So you take about 1/3 standard lot to keep risk at exactly 1%.
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