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Trading Math

How to Calculate Lot Size

Lot size is worked out from three numbers: the money a trade may lose, the distance in pips to its stop loss, and the value of a pip per lot. This paper shows you the sum in its three steps, why the same money at risk gives three different sizes at three stop distances, what the sum did on two real days, and where the answer goes on your platform.

Difficulty
Beginner
Reading time
5 min
Pages
7
Reviewed by
Saman Rahbar

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Three numbers, in this order

Lot size is worked out from three numbers, and they come in a fixed order. First, the money the trade may lose if it goes wrong — a fixed amount, here one per cent of a five-thousand-dollar account, fifty dollars. Second, the distance in pips from the entry to the stop loss, the order that closes the trade at a price you chose: a pip is the fourth decimal place, and on 3 September 2026 the distance from 1.15872 down to 1.15672 is twenty pips. Third, the pip value per lot, ten dollars on the euro against the dollar. Divide the first by the second times the third — fifty over twenty times ten — and the size is 0.25 lots.

The same fifty dollars, three distances

The sum has one consequence that takes a moment to see: the further the stop, the smaller the trade. Fifty dollars at ten pips is half a lot; at twenty pips, a quarter; at fifty pips, a tenth. All three lose the same fifty dollars if the stop is reached, because the size was worked out from the distance. The stop distance decides the size; the size does not decide the stop.

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