Prerequisite: Market, limit and stop orders
Learning objective
Compute a planned loss budget and position size using consistent currency units.
Start with a practice equity amount and a chosen risk percentage. Risk budget = equity × risk percentage ÷ 100. This percentage is an input to a learning exercise, not a universally suitable recommendation. Aggregate positions and correlation can make total risk larger than one position suggests.
Convert the loss between entry and stop for one tradable unit into the account currency, using the provider’s contract specification and conversion. Subtract a reserve for planned costs. Units = (risk budget − reserve) ÷ monetary loss per unit. Round down to the permitted increment.
Margin is collateral required to hold exposure; it is not the amount you can lose. A normal stop can slip, and funding or conversion costs can change. Review available margin separately and do not increase size merely because the platform permits more leverage.
Worked example
Practice only: equity 10,000; risk 0.5%; budget 50. Reserve 5 and stop loss 2 per unit leave 45 for price movement. With a one-unit increment, 22 units plan a loss of 44 + 5 = 49. Actual execution may exceed that plan.
Common mistakes
Do not mix pips with money, assume a universal gold contract or confuse margin with risk.
Practice
Use the practice calculator. Increase cost reserve while holding all other inputs fixed and explain why size falls.
Position-size practice tool
Use one account currency for every amount. Enter monetary loss per unit at the stop from your broker’s contract specification. This tool does not fetch quotes or place orders.
Round down to the permitted increment. Gaps, slippage and currency conversion can increase the actual loss.