Position sizing
How to calculate lot size in forex and gold
Lot size is not something you choose. It is something you calculate, from your risk and your stop. Here is the method, step by step, with examples.
Most traders pick a lot size that "feels right" and then place the stop wherever the trade needs it. That gets the order backwards. The stop comes from your analysis, the risk comes from your rules, and the lot size is the only thing left to calculate.
What a lot is
In MetaTrader, volume is measured in lots:
| Name | Lots | Units of the base currency |
|---|---|---|
| Standard lot | 1.00 | 100,000 |
| Mini lot | 0.10 | 10,000 |
| Micro lot | 0.01 | 1,000 |
For gold (XAUUSD), one lot is usually 100 ounces. Brokers can use different contract sizes, so check the symbol specification in MetaTrader.
Step 1: turn your risk into dollars
Start with your risk per trade. With a $5,000 account and 1% risk, you are willing to lose $50 on this trade. If you don't have a risk rule yet, read forex money management rules first.
Step 2: measure the stop distance
Find the distance between your entry and your stop loss.
- Forex: measure it in pips. One pip is 0.0001 on most pairs and 0.01 on JPY pairs. Entry 1.0850 and stop 1.0825 is 25 pips.
- Gold: measure it in dollars of price. Entry 2350.00 and stop 2342.00 is a distance of 8.
Step 3: find the value of that distance for one lot
- Pairs quoted in US dollars (EURUSD, GBPUSD, AUDUSD): one pip on one lot is $10.
- Other pairs: one pip on one lot is 10 units of the quote currency (1,000 yen on JPY pairs), converted into dollars. On USDJPY at 150.00, that is 1,000 ÷ 150 ≈ $6.67.
- Gold: a $1.00 move on one 100-ounce lot is $100.
Step 4: divide
lots = money at risk ÷ (stop distance × value per unit for 1 lot)
Then round the result down to 0.01.
Three worked examples
| Trade | Money at risk | Stop | Value per lot | Lot size |
|---|---|---|---|---|
| EURUSD, $5,000, 1% | $50 | 25 pips | $10 per pip | 50 ÷ 250 = 0.20 |
| USDJPY at 150, $10,000, 2% | $200 | 30 pips | $6.67 per pip | 200 ÷ 200 = 1.00 |
| XAUUSD, $5,000, 2% | $100 | $8.00 | $100 per $1 | 100 ÷ 800 = 0.125 → 0.12 |
You can check all three in the lot size calculator.
Common mistakes
- Rounding up. 0.125 becomes 0.12, not 0.13. Rounding up quietly raises your risk on every trade.
- Treating every pair the same. A pip on GBPJPY is not worth the same as a pip on EURUSD. Always use the right pip value.
- Moving the stop after sizing. If you widen the stop after you entered, your lot size is no longer correct and your risk has grown.
- Ignoring costs. Spread and commission add a little to every loss. Some traders size slightly below the exact result to leave room.
- Very tight stops. A 3-pip stop can produce a huge lot size from a normal risk. A cap on lot size relative to your balance protects you from this.
Doing it on every trade, without thinking
The method is easy. Doing it before every trade, including the quick ones, is where people slip. RavandFX calculates the lot size on your MetaTrader 5 chart as you drag the stop line, rounds it down, caps it by balance and shows the dollar risk before you press Set. Try it in the simulator.
Common questions
Why not just use the same lot size on every trade?
Because the same lot size with different stop distances risks different amounts of money. A 0.50 lot trade with a 10-pip stop risks $50 on EURUSD; with a 40-pip stop it risks $200. Calculating the lot size from your stop keeps the risk the same.
What is the pip value on JPY pairs?
On JPY pairs one pip is 0.01. One pip on one standard lot is 1,000 yen, which you convert into dollars with the USDJPY price. At 150.00, that is about $6.67 per pip per lot.
Should I round the lot size up or down?
Always down. MetaTrader works in steps of 0.01 lots, and rounding up would put the loss at your stop above your planned risk.