Risk
Sizing by dollars, not pips
Position size follows from dollars at risk and stop distance.
Arithmetic
True by construction. No market data is needed to know it.
Arithmetic (positionSizeLots in src/risk-math.mjs).
What it is
Lots = dollars at risk / (stop in pips x dollars per pip per lot). With a $10,000 account, 1% risk and a 25 pip stop on a USD-quoted pair at about $10 a pip per standard lot, the size is $100 / (25 x $10) = 0.4 lots.
What it suggests
Two trades with different stop distances need different sizes to risk the same dollars.
How to check it
Compute the size after choosing the stop, never before.
Common mistakes
- Using the same lot size for every stop.
Related lessons
Written in our own words. Education only, not financial advice.