Working out position size
What you learn in 3 minutesA reader asked: "I know I want to risk R200 on a trade, but how do I turn that into a lot size?" This lesson answers that question. You will learn to work out position size using three numbers you already have: the money you are willing to lose, the distance to your stop in pips, and the value of one pip for the pair you are trading. By the end, you will be able to calculate your own position size in rand, step by step.
R200 risk, 25-pip stop: what lot size
| Step | Amount | Note |
|---|---|---|
| Risk in rand | R200 | The amount you decide you are comfortable losing if the stop is hit. |
| Stop distance in pips | 25 pips | The difference between your entry price and your stop-loss price, measured in pips. |
| Pip value per standard lot | R10 | For USD/ZAR, one pip on one standard lot (100,000 units) is R10. This is fixed for this pair. |
| Risk per pip | R8 | R200 divided by 25 pips = R8 per pip. |
| Position size in lots | 0.80 lots | R8 per pip divided by R10 per pip per standard lot = 0.80 lots. |
Your broker may round the lot size to the nearest 0.01, charge a spread that affects your entry, or apply a commission. The pip value may also vary slightly if the broker uses a different contract size or if the exchange rate moves. Always check the contract specifications with your broker.
The mistake people make here
The common mistake is to pick a lot size first, then set the stop. That reverses the logic. You end up risking more than you planned because the stop distance is an afterthought. Instead, start with the money you are willing to lose, then find your stop distance on the chart, then calculate the lot size. If the calculated size is not allowed by your broker, adjust the stop or the risk, not the other way around.Check yourself
If you risk R150 and your stop is 30 pips away, what is your position size in lots for USD/ZAR?
Risk per pip = R150 / 30 = R5 per pip. Position size = R5 / R10 = 0.50 lots.
You want to risk R80 and your stop is 20 pips. What lot size do you get?
Risk per pip = R80 / 20 = R4 per pip. Position size = R4 / R10 = 0.40 lots.