Fix the percentage, vary the size
The most common error is fixing the size — "I always trade 0.10 lots" — and letting risk float with stop distance. A wide-stop trade then risks a multiple of a tight-stop trade while you believe you are being consistent.
The correct order is three steps: (1) fix the percentage, (2) place the stop from market structure rather than preference, (3) derive size from both. Size is an output, not an input — compute it in the position size calculator and check the result in the liquidation distance calculator.
The same dollar through each control
The reference account for this family: $1,000, risking 1% — $10 a trade — on 0.01 lots of gold, where $1 of price is $1 of money. A $10 stop distance is therefore exactly 1% of the account.
Every page here follows that same dollar through a different control: how much I risk, when I remove the risk, and how many losses the account can absorb before it is finished.
The formula
Position size = (balance × risk %) ÷ (stop distance × value per point)
A worked example
The reference account: $1,000 risking 1%, or $10. On gold at 0.01 lots each dollar of price is one dollar of money, so a $10 stop distance consumes exactly the risk budget.
If market structure demands a wider stop — $25, say — size must fall to 0.004 lots to hold 1%. A trader who stays at 0.01 lots has risked $25, or 2.5%, and has multiplied their risk without ever deciding to.
Common mistakes with this term
- Fixing lot size instead of the percentage, so real risk swings with every change in stop distance.
- Tightening the stop to justify a bigger size, which controls risk by breaking the trade's premise.
- Computing the percentage from balance rather than equity while losing positions are open.