Appropriate lot size

Hello everyone,
I have a question and would be glad to know your opinions and answers to it.
What factors do you consider when determining the appropriate lot size for a trade in forex?


Basically, my risk exposure between 1-2% for each trade, and no more than 5% of open trades. This is applicable for small to medium account sizes.


The method I use to determine my lot size is so simple and unsophisticated I am ashamed to post it here. Honestly.
Anyway here goes…whatever the balance is on my account I divide that figure by 7500 and that is the lot size I use to trade. So if you see me use a lot size of 0.04 you know my account balance is around $300 lololol.

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There are a few factors to consider when selecting how much to trade in FX. First, consider how much money you have in your trading account and how much you’re willing to lose. In general, risking only a tiny amount of your account balance is safer. You should also consider where you would place your stop loss, which is a method of limiting your possible losses. The volatility of the currency pair you’re trading is also essential; if it has large price swings, you may wish to trade less. Finally, make sure your lot size corresponds to your trading strategy and the amount of leverage you’re employing. Starting small and progressively increasing your trades as you gain experience is usually a good strategy.

only two - no need to complicate things! :wink:

the percentage i’m risking per trade, and the distance between the entry and the stop-loss

i just divide one by the other and it gives me the position-size

Account size, risk tolerance, stop loss and target, volatility, my strategy, leverage, and market conditions.

Thank you very much, Flamingo. You constantly strive for consistency and completeness in your responses.

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Based on every one’s opinion I think stop loss and target are really important.

It is a sound and expert opinion.

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A prudent risk management strategy.

you’re super-friendly and super-tactful, Imogen, thank you but i know i don’t deserve a compliment like that: the truth is that i sometimes reply out of frustration or even in exasperation, and sometimes struggle to be polite myself - in reality i’m old, ill, moody and really not well suited to posting in forums, and even though i have decades of experience of trading for a living (sometimes employed, sometimes self-employed) i’m not actually very good at imparting it to others here, and often just get aggravated when it seems that many people are more interested in being right than in learning anything (i don’t mean you!!!)

but thank you anyway for your too-kind words, which i appreciated! :+1:

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I think your risk tolerance and how long you are trading on that pair or assets are important factors for choosing appropriate lot size.

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How much I’m willing to risk and what I actually have at risk.

In general you never want to risk more than 2% of your account value on a single trade.

If you have a $1,000 account and your trading plan has a max risk of 2% per trade you are only able to risk $20 per trade.

To stay within this risk rule you need to either adjust your stop loss in pips or your lot size. Most often adjusting the lot size is the better option since a stop loss should be placed where market structure dictates.

$20 risk at 10 pip SL = 0.2 lot size

$20 risk at 20 pip SL = 0.1 lot size

$20 risk at 25 pip SL = 0.08 lot size

$20 risk at 40 pip SL = 0.05 lot size

$20 risk at 50 pip SL = 0.04 lot size

Formula: (max risk $ amount ÷ SL # of pips) x 0.1 = appropriate lot size

You’re right! But remember, you have to think about many things and never rely on just one factor alone.

I set a stop loss and then calculate the lot size based on 1-2% risk of the balance. You need to account for multiple trades as well.

Lot size for a trade is an important aspect of risk management. It depends on your account size , volatility of the currency pair and your personal risk tolerance.

You try to show with proof. :joy: Thank you.

Yes, the duration of trading is also important and can indicate a trader’s ability and skill.

As my trading capital is small, I don’t take more than 2% risk because I cannot maintain risk management policy otherwise.

It is advisable, and each person should assess their own level of comfort with risk.