Position sizing with the 1% rule

How to turn “risk 1% per trade” into an exact lot size, with worked examples for EUR/USD and gold.

The formula

Position size (lots) = risk amount ÷ (stop loss in pips × pip value per lot).

Your risk amount is your account balance multiplied by your risk percentage. The stop distance comes from your setup, not from how much you would like to make.

Example: EUR/USD

Account $10,000, risk 1% = $100. Stop loss 20 pips. The pip value on EUR/USD is $10 per standard lot. Position size = 100 ÷ (20 × 10) = 0.50 lots.

Example: gold

Same $100 risk, with the stop $5.00 away — 50 pips at 0.10 per pip. The pip value is $10 per lot (100 oz). Position size = 100 ÷ (50 × 10) = 0.20 lots.

Common mistakes

• Choosing the lot size first and the stop second.
• Forgetting that yen pairs and gold use different pip sizes.
• Rounding up instead of down to the broker’s lot step.
• Opening several correlated trades at 1% each — which is really one bigger bet.