Lot Size Calculation in Forex: Formula and Worked Examples

Lot size decides how much you lose when your stop is hit. Get it wrong and a normal loss becomes a bad day. This guide shows how to calculate lot size in forex in a few short steps, with worked examples for EURUSD, USDJPY and gold. It also covers the common errors that quietly turn a 1% trade into a 5% trade.

The maths takes a minute. What protects you is doing it the same way on every trade, in the right order.

What a lot is

A lot is the size of your trade. In MT4, the numbers look like this (CMC Markets):

A pip is 0.0001 on most pairs and 0.01 on JPY pairs. Most MT4 brokers quote one extra digit, called a point. So 10 points = 1 pip. If MT4 shows a stop of 200 points, that is 20 pips.

The lot size formula

Two lines are all you need:

• Risk amount = account balance × risk %
• Lot size = risk amount ÷ (stop distance in pips × pip value of 1 lot)

The pip value must be in your account currency. For pairs that end in USD, such as EURUSD or GBPUSD, on a USD account, it is $10 per standard lot. For other pairs, it changes with the price. Example 2 below shows how.

How to calculate lot size in forex, step by step

Follow these steps in this order. The order matters as much as the maths.

1. Place the stop on the chart first. Put it where the trade idea is wrong, not where it gives a nice lot size. CMC Markets puts it plainly: work out the lot size after you set a valid stop, and never move the stop to fit the lot you want.
2. Turn your risk % into money. 1% of $5,000 is $50.
3. Find the pip value of 1 lot in your account currency.
4. Divide and round down. Never round up.
5. Check it backwards. Lot × stop in pips × pip value should be equal to or less than your risk amount.

Example 1: EURUSD

• Account: $5,000. Risk: 1%, so $50.
• Buy EURUSD with a stop 20 pips below the entry.
• Pip value of 1 lot: $10.

Lot size = 50 ÷ (20 × 10) = 50 ÷ 200 = 0.25 lots.

Check: 0.25 lots is worth $2.50 a pip. 20 pips × $2.50 = $50. Correct.

Now say the chart gives you a 23-pip stop instead. Lot size = 50 ÷ (23 × 10) = 50 ÷ 230 = 0.217. MT4 takes two decimals, so round down to 0.21 lots. Your real risk is 0.21 × 23 × 10 = $48.30. A little under $50 is fine. Rounding up to 0.22 would risk $50.60, a little over your rule.

Example 2: USDJPY

When USD is the first currency in the pair, the pip value depends on the price.

Pip value of 1 lot = (0.01 ÷ price) × 100,000

Say USDJPY is at 150.00 (a round number for the example). The pip value is 1,000 ÷ 150 = about $6.67 per lot.

• Same account: $5,000, risk $50.
• Stop: 30 pips.

Lot size = 50 ÷ (30 × 6.667) = 50 ÷ 200 = 0.25 lots. (30 × 1,000 ÷ 150 is exactly 200, so no rounding is needed here.)

Check: 30 pips × $6.667 × 0.25 = $50. Correct.

If USDJPY moves to a very different price, the pip value moves too. Work it out again with the current price.

Example 3: gold (XAUUSD)

Gold needs more care, for two reasons:

• Contract size differs by broker. Many brokers set 1 lot of gold to 100 ounces (for example, this RoboMarkets specification). Others use different sizes, as traders note in this BabyPips thread.
• "Pip" means different things for gold on different sites. So measure the stop in dollars of price instead.

The formula for gold on a USD account is:

Lot size = risk amount ÷ (stop distance in dollars × contract size)

To find the contract size in MT4: open Market Watch, right-click the gold symbol, choose Specification, and read "Contract size".

Say gold is at 3,000.00 (a round number for the example). You buy with a stop at 2,992.50. The stop distance is $7.50.

• With a 100-ounce contract: 1 lot loses 7.50 × 100 = $750 at the stop. Lot size = 50 ÷ 750 = 0.0667. Round down to 0.06 lots. Real risk: 0.06 × 750 = $45.
• With a 10-ounce contract: 1 lot loses 7.50 × 10 = $75. Lot size = 50 ÷ 75 = 0.667. Round down to 0.66 lots. Real risk: $49.50.

Now see the danger. A trader assumes a 10-ounce contract and opens 0.66 lots, but the broker's contract is 100 ounces. At the stop, the loss is 0.66 × 750 = $495. That is about 10% of a $5,000 account, on a trade meant to risk 1%. Indices and crypto have the same problem. Check the specification once for every new symbol.

If you trade forex pairs and do not want to do this by hand, our free position size calculator does the forex maths for 28 pairs and eight account currencies (USD, EUR, GBP, JPY, CHF, AUD, CAD and NZD). For gold and indices, it asks you for the pip value, because contract sizes differ.

Five mistakes that turn 1% into 5%

1. Choosing the lot first. "I trade 0.50 lots" is not a risk plan. With a 20-pip stop on EURUSD, 0.50 lots risks $100. With a 60-pip stop, it risks $300. The lot stays the same and the risk triples.

2. Moving the stop after sizing. You size 0.25 lots for a 20-pip stop. Price comes close, so you move the stop to 40 pips. Your risk is now 0.25 × 40 × 10 = $100, or 2%. You never decided to risk 2%, but that is now your risk. If the idea needs a wider stop, close the trade or cut the lot to match.

3. Mixing up points and pips. MT4 often shows distances in points. Use points where the formula wants pips and the lot is off by ten times, in one direction or the other.

4. Using the wrong contract size. See the gold example above. It is the same story for indices and crypto.

5. Forgetting costs. The formula leaves out spread, commission and slippage. If your broker charges, for example, $7 per lot for the round trip, 0.25 lots adds $1.75. On a tight stop, the spread can be a big share of the risk. Around news and at the weekly open, a stop can also fill worse than its price. Leave a small margin.

When the lot comes out too small or too big

Too small. Many brokers have a minimum of 0.01 lots, but check yours. Say the formula gives 0.004 lots, because your account is small and the stop is wide. Do not tighten the stop to make the numbers fit. Skip the trade, or wait for a setup with a stop that fits your risk.

Too big. A very large lot usually means a very tight stop. With a 5-pip stop and $50 risk, the formula gives 50 ÷ (5 × 10) = 1.00 lot. That is correct maths, but one pip of spread is already 20% of your stop. A small spike can take you out. Make sure the stop is a real level, not a number picked to get a big lot.

Lot size also controls how long you survive a losing streak. Our article on risk of ruin shows with worked numbers how risk per trade changes your chance of reaching a drawdown limit. For prop-firm accounts, pair this with a daily loss limit.

Lot size checklist

Run this before every trade:

1. Stop placed on the chart where the idea is wrong: ___ pips (or $___ for gold)
2. Risk: % of $ = $___
3. Pip value of 1 lot, in my account currency: $___
4. Contract size checked (gold, indices, crypto): ___
5. Lot = risk ÷ (stop × pip value) = ___, rounded down
6. Check: lot × stop × pip value is not more than my risk
7. Spread and commission are small compared to the stop
8. After entry, I do not widen the stop

Summary

To calculate lot size in forex, set the stop first, turn your risk % into money, find the pip value, divide, and round down. On gold and other CFDs, check the contract size before the first trade. The two errors that do the most damage are choosing the lot by feel and moving the stop after sizing.

Under time pressure, steps done by hand are the first to be skipped. Discipline Guard is one way to put it on the chart: you set your risk %, drag the red stop-loss line, and the panel updates the lot size as you drag. It runs on MT4 for Windows (computer or VPS), not on the phone app.