Lot Sizes and Position Sizing

Proper position sizing is critical for risk management and long-term success.

Standard Lot Sizes

• Standard Lot: 100,000 units of base currency
• Mini Lot: 10,000 units (0.1 lot)
• Micro Lot: 1,000 units (0.01 lot)
• Nano Lot: 100 units (0.001 lot)

Pip Value Calculation

For EUR/USD with a standard lot:

• 1 pip = $10
• For mini lot: 1 pip = $1
• For micro lot: 1 pip = $0.10

Position Sizing Formula

Example:

• Account: $10,000
• Risk: 2% = $200
• Stop Loss: 50 pips
• Position Size = $200 / (50 x $10) = 0.4 lots

Golden Rules

1. Never risk more than 1-2% per trade
2. Calculate position size BEFORE entering
3. Adjust size based on stop loss distance
4. Consider correlation between positions
5. Reduce size during volatile periods