To work out how to calculate position size, divide the money you are prepared to lose by the distance to your stop, then by what each point or pip of movement is worth. The same formula works for forex lots, CFDs and £-per-point spread bets. Below we show it for each, with hypothetical examples in pounds.
Quick answer: how do you calculate position size?
Position size = risk amount ÷ (stop distance × value per point or pip). Decide your risk in pounds first, measure the stop distance from entry to stop, then find what one pip or point is worth for one unit of the product. Divide, and round the result down to your broker’s smallest increment.
The one formula behind every position size
Every position size calculation has three inputs. Your risk amount is the most you will lose if the stop is hit, in pounds. Your stop distance is the gap between entry and stop, in pips or points. The value per pip or point is what one unit of movement is worth for one lot, contract or £1 stake.
Position size = risk amount ÷ (stop distance × value per pip or point). Only the last input changes between forex, CFDs and spread bets.
The risk amount itself is a separate decision. Our guide on how much to risk per trade covers the percentage, so here we simply assume you have already chosen it.
How to calculate position size step by step
- Set the risk in pounds. For example, 1% of a £5,000 account is £50.
- Place the stop where the trade idea is proven wrong. Then measure the distance from entry.
- Find the value per pip or point for one unit, converted into pounds.
- Divide the risk by stop distance × value per unit.
- Round down to the nearest size your broker allows, and check the margin needed.
The order matters. The stop comes from the chart, and the size is fitted to the stop. Doing it the other way round, choosing a size and then squeezing the stop to fit, is how stops end up in places the market reaches through normal noise. Our post on where to place a stop-loss with price action explains how we choose that level.
Forex: lot size calculation and pip value
Forex is traded in lots. A standard lot is 100,000 units of the base currency, a mini lot is 10,000 and a micro lot is 1,000. For most pairs a pip is 0.0001; for yen pairs it is 0.01. For a fuller walk-through, see what a pip is and how pip value works.
Pip value in pounds
Pip value is units × pip size, and it comes out in the quote currency (the second currency in the pair). On EUR/GBP that is already pounds: £10 per pip for a standard lot. On EUR/USD it is $10, which you convert into pounds at the current GBP/USD rate.
| Lot size | Units | Pip value in $ | Pip value in £ |
|---|---|---|---|
| Standard (1.00) | 100,000 | $10.00 | £8.00 |
| Mini (0.10) | 10,000 | $1.00 | £0.80 |
| Micro (0.01) | 1,000 | $0.10 | £0.08 |
Worked example: EUR/USD
Example: on a £5,000 account a trader risks £50 on EUR/USD with a 25-pip stop, and one standard lot is worth £8 per pip. Lots = £50 ÷ (25 × £8) = 0.25 lots. Check: 0.25 lots is £2 per pip, and 25 pips × £2 is £50.
Worked example: a yen pair
On USD/JPY a standard lot pip is 100,000 × 0.01 = ¥1,000. With a hypothetical GBP/JPY rate of 190.00, that is about £5.26 per pip. A 40-pip stop risking £50 gives £50 ÷ (40 × £5.26) = 0.237, which rounds down to 0.23 lots and about £48 of real risk.
CFDs: sizing by contracts or shares
With a CFD you choose a number of contracts or shares, and each has a value per point set by your provider. A share CFD is simplest: each share moves £0.01 per penny. Index and commodity CFDs vary, so check the contract specification before you trade.
Example: a trader buys a share CFD at 400p with a stop at 380p, so 20p of risk per share. Risking £50 gives £50 ÷ £0.20 = 250 shares, a position worth £1,000. Leverage means the deposit is only a fraction of that, but losses are measured on the full £1,000, and they can exceed the deposit.
Spread bets: stake in £ per point
A spread bet is sized directly in pounds per point, which makes the arithmetic short. Stake = risk amount ÷ stop distance in points. What counts as a point depends on the market and provider, so confirm it on the deal ticket.
Example: a trader spread bets an index with a 40-point stop and £50 at risk, so £50 ÷ 40 = £1.25 per point. On GBP/USD, where a point is usually one pip, a 25-pip stop gives £2 per point. Spread bets are leveraged too, so a move against you costs your full stake per point, whatever the deposit.
| Product | You choose | Formula | Example result |
|---|---|---|---|
| Forex | Lots | Risk ÷ (pips × £ per pip per lot) | 0.25 lots, 25-pip stop |
| Share CFD | Shares | Risk ÷ risk per share | 250 shares, 20p stop |
| Spread bet | £ per point | Risk ÷ stop in points | £1.25 a point, 40-point stop |
Margin and leverage: whether you can open the trade
Leverage does not change your correct position size. It only decides how much deposit, or margin, the broker holds while the trade is open. A size that fits your risk may still need more margin than you have.
The European regulator ESMA set retail CFD leverage limits of 30:1 on major currency pairs, down to 2:1 on cryptocurrencies, with a margin close-out at 50% of required margin. UK providers apply their own regulator’s limits, so check your provider’s terms. Higher leverage makes it easier to open positions too large for your account, which magnifies losses as well as gains. For the mechanics, see our guide to margin and leverage explained for beginners.
Common mistakes with position sizing
- Using dollar pip values on a pound account. $10 per pip is not £10 per pip; convert first.
- Mixing up lot units. Some platforms show volume in mini lots, which creates a tenfold error.
- Forgetting yen pairs. A pip is 0.01, not 0.0001.
- Rounding up. Always round down, so real risk is at or below plan.
- Confusing margin with risk. Margin is a deposit; risk is the loss if the stop is hit.
- Ignoring the broker minimum. If the smallest size breaks your risk limit, skip the trade rather than tighten the stop.
Spreads and slippage can also make a loss slightly bigger than planned, especially around news. Sizing correctly every time also takes the emotion out of individual trades, which is a big part of how to stop emotional trading.
Frequently asked questions
Is a position size calculator accurate for a UK forex account?
Usually, if you set the account currency to GBP and enter the right pair. Work one trade by hand and compare it with the calculator and the broker’s displayed pip value. All three should agree.
What if my broker’s minimum size is bigger than my calculated size?
Then the trade would risk more than your plan allows. Look for a smaller contract, such as micro lots or a lower minimum stake, or pass on the trade.
Does a bigger stop mean a smaller position?
Yes. With risk fixed in pounds, doubling the stop distance halves the position size. That keeps the loss the same whichever stop the chart demands.
Should position size change with win rate?
Not on the basis of a hot or cold streak. Win rate on its own says little; our article on why win rate matters less than risk-reward explains why.
Next steps
Position sizing is one piece of the rules-based approach in our trading risk management guide for beginners. Before sizing any trade, ask whether the trade is worth the risk at all.
The free basics section of our price action trading course covers building a risk model step by step.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
