Position Sizing
How to calculate the correct position size for every trade based on your account balance, risk tolerance, and stop loss distance.
What It Means
Position sizing is the process of calculating how many lots or units to trade based on the amount of capital you are willing to risk. It is the single most important skill for funded account trading because it directly controls your drawdown exposure. Getting position sizing right means you can survive losing streaks. Getting it wrong means one bad trade can end your challenge.
The Formula
The standard position sizing formula is: Position Size = (Account Balance × Risk %) ÷ (Stop Loss in Pips × Pip Value). For standard forex pairs with USD as the quote currency, 1 standard lot (100,000 units) has a pip value of $10. A mini lot (10,000 units) is $1 per pip. A micro lot (1,000 units) is $0.10 per pip.
Worked Example
Account: $50,000. Risk: 0.5% ($250). Stop loss: 20 pips. Pip value: $10 (standard lot). Position size = $250 ÷ (20 × $10) = 1.25 standard lots. At 1:100 leverage this requires $1,250 margin — well within the available balance.
Position Sizes by Account Level
Here are recommended position sizes for each account tier using 0.3% risk and a 20-pip stop loss:
- $5K account: Risk $15. Position size = 0.075 lots (7,500 units). Pip value: ~$0.75.
- $10K account: Risk $30. Position size = 0.15 lots (15,000 units). Pip value: ~$1.50.
- $25K account: Risk $75. Position size = 0.375 lots (37,500 units). Pip value: ~$3.75.
- $50K account: Risk $150. Position size = 0.75 lots (75,000 units). Pip value: ~$7.50.
- $100K account: Risk $300. Position size = 1.5 lots (150,000 units). Pip value: ~$15.00.
How Leverage Works with Position Sizing
Leverage determines how much margin is required to open a position. During the evaluation phase you have 1:100 leverage, meaning a 1 standard lot position requires $1,000 margin. On funded accounts, leverage drops to 1:30, so the same 1 lot position requires approximately $3,333 margin. This means your position sizes are capped not just by risk tolerance but also by available margin, especially on funded accounts. Always check that your required margin is below your available margin before entering a trade.
You have a $50K funded account (1:30 leverage). You want to risk 0.3% ($150) with a 30-pip stop. Position size = $150 ÷ (30 × $10) = 0.5 standard lots. Margin required: $5,000 ÷ 30 × 0.5 = ~$833. Available balance is $50,000.
The trade is well within both risk and margin limits. Position size is safe.
You have a $5K evaluation account but open 2 standard lots of EUR/USD. A 20-pip adverse move costs $400, which is 8% of the account. If this happens on a single day, you likely breach the 3% daily drawdown limit.
Position size is far too large for the account. Even a small adverse move can violate drawdown rules.
How Leverage Changes Affect Funded Accounts
The shift from 1:100 leverage during evaluation to 1:30 leverage on the funded account is a critical transition. A position size that required $500 margin on evaluation may require $1,667 on funded. If you are used to trading certain sizes, you must recalculate for the lower leverage. The maximum position size on a funded $50K account at 1:30 is theoretically around 16 standard lots, but in practice you should never exceed 2-3 lots due to the 7% max drawdown constraint.
Common Mistakes
- Using the same position size on a funded account as during evaluation without adjusting for lower leverage
- Not accounting for pip value differences across currency pairs (EUR/JPY, GBP/USD, etc.)
- Increasing position size after a losing streak to try to recover faster
- Ignoring margin requirements and getting margin-called intraday