Size your lot from Stop loss distance so every trade risks the same

A good lot size is not a number you open the same way every trade. It is the result of a calculation. You set the money you are willing to lose per trade first, place your Stop loss from the chart, then work backwards to how many lots to open, so that if the Stop loss is hit you lose exactly what you planned. Do this every trade and your risk per trade stays constant, whether the Stop loss is close or far.

This article follows on from Why many traders risk only 1% per trade and uses the pip and lot ideas from Pip vs lot explained.

The one formula to remember

lot = money at risk ÷ (Stop loss distance in pips × pip value of 1 lot)

You need three values:

1. Money at risk, for example 1% of your account
2. Stop loss distance, measured from the entry price to the Stop loss price, counted in pips
3. Pip value of 1 lot, which depends on the instrument

Pip values most brokers use:

Instrument	1 pip = price move of	Pip value of 1 lot
Pairs ending in USD, e.g. EURUSD	0.0001	10 USD
Gold (XAUUSD)	0.10 dollar	10 USD
Pairs ending in JPY, e.g. USDJPY	0.01	Depends on price, see example 4

Example 1: EURUSD

A 1,000 dollar account, risking 1%, with the Stop loss 25 pips away.

• Money at risk = 1,000 × 1% = 10 dollars
• lot = 10 ÷ (25 × 10) = 10 ÷ 250 = 0.04 lot

Check: at 0.04 lot, 1 pip is worth 0.04 × 10 = 0.40 dollar. A 25-pip Stop loss loses 0.40 × 25 = 10 dollars, which matches the plan.

Example 2: Gold

The same 1,000 dollar account, still risking 1%, but the Stop loss is 5 dollars from the entry price.

• Convert the distance to pips: 5 ÷ 0.10 = 50 pips
• lot = 10 ÷ (50 × 10) = 10 ÷ 500 = 0.02 lot

Check: 1 lot of gold is usually 100 ounces, so 0.02 lot is 2 ounces. If price moves 5 dollars against you, you lose 2 × 5 = 10 dollars.

Different Stop loss, different lot

Every row in this table uses the same 10 dollars at risk, on a pair ending in USD.

Stop loss distance	Lot you can open	Loss if Stop loss is hit
10 pips	0.10	10 dollars
20 pips	0.05	10 dollars
50 pips	0.02	10 dollars
100 pips	0.01	10 dollars

A Stop loss ten times farther away means a lot ten times smaller, so the money lost stays the same. This is the heart of the article: you are free to place the Stop loss where the chart says, and let the lot size do the adjusting.

What happens if you open the same lot every trade

In our ICT test on gold, every trade opened the same 0.10 lot, but the Stop loss sat beyond the point where price swept, which was often 10–30 dollars away. Look at the money lost per trade:

• 10 dollars away = 100 pips, a loss of 0.10 × 10 × 100 = 100 dollars
• 30 dollars away = 300 pips, a loss of 0.10 × 10 × 300 = 300 dollars

On a 10,000 dollar account, that is 1% to 3% risk per trade, depending on how far the Stop loss was. The riskiest trade carried three times the risk of the least risky one, without anyone meaning it to. So the results were driven more by the trades with far Stop losses than by the others.

Example 3: When the minimum lot is still too big

A 1,000 dollar account risking 1% = 10 dollars, but this gold setup needs a Stop loss 15 dollars away.

• Convert to pips: 15 ÷ 0.10 = 150 pips
• lot = 10 ÷ (150 × 10) = 10 ÷ 1,500 = 0.0067 lot

Most brokers have a minimum of 0.01 lot. At 0.01 lot you would lose 0.01 × 10 × 150 = 15 dollars, or 1.5% of the account. That is half again more than you planned.

The right choice is to skip this trade, or wait for an entry with a tighter Stop loss. The wrong choice is to move the Stop loss closer so the lot fits, because the new Stop loss is no longer where the chart says it should be.

Always fit the lot to the Stop loss. Never fit the Stop loss to the lot.

Example 4: USDJPY

On pairs that end in a currency other than USD, the pip value is in that currency first, so you have to convert it back to dollars. Say USDJPY is at 150.00.

• 1 lot = 100,000 units, and a 1-pip move (0.01) is worth 100,000 × 0.01 = 1,000 yen
• Convert to dollars: 1,000 ÷ 150 = 6.67 dollars per pip

A 2,000 dollar account risking 1% = 20 dollars, with a 30-pip Stop loss.

• lot = 20 ÷ (30 × 6.67) = 20 ÷ 200.1 = 0.0999, rounded down to 0.09 lot
• Check: 0.09 × 30 × 6.67 = 18.01 dollars, a little under 20 dollars because we rounded down

The pip value on pairs like this changes with price. If USDJPY rises to 160, the pip value drops to 1,000 ÷ 160 = 6.25 dollars.

Steps before every trade

1. Check your current Equity and work out the money at risk, for example 1%
2. Place your Stop loss from the chart and measure the distance from entry in pips
3. Find the pip value of 1 lot for that instrument
4. Calculate the lot size and round it down to 2 decimal places
5. If the result is below the minimum lot, skip the trade

The lot size calculator at the end of this article can help. Enter your account size, risk percentage and Stop loss distance, and you get the lot size straight away.

Common mistakes

• Opening the same lot every trade. Trades with a far Stop loss end up carrying many times more risk than the others.
• Moving the Stop loss to fit the lot you want, instead of adjusting the lot to the Stop loss.
• Rounding the lot up. You risk more than planned on every trade, and over time that adds up.
• Forgetting that spread and slippage make losses bigger than calculated. During news or thin markets, the actual exit price can be worse than the Stop loss you set.
• Using a 10 dollar pip value for every pair. Pairs that do not end in USD have a different pip value, and it changes with price.