All lessons
Risk budget and position size
Start with the loss you planned to tolerate. Then work backwards to the number of units.
Derive position quantity from a chosen cash budget and a meaningful stop distance.
Choose a cash loss budget that the practice plan can tolerate before selecting quantity. A percentage is only a way to express that budget, not a universal safe rule. Consider other open positions and the possibility of several losses together.
Locate the price that invalidates the setup, then calculate its distance from entry. Divide the planned price-move budget by the loss per unit at that distance. Include expected fees and a slippage allowance; round quantity downward to the product's permitted step.
Check margin and contract specifications separately after sizing. If the minimum order is too large, skip the simulated trade rather than moving the stop to fit. Position sizing controls planned exposure but cannot guarantee that actual losses stay inside the chosen budget.
Let’s use numbers · hypothetical example
A hypothetical USD 2,000 demo account chooses USD 10 risk. Reserve USD 2 for costs, leaving USD 8. With a 20-pip stop and USD 1 per pip for 10,000 EUR units, quantity is 4,000 EUR: 8 ÷ 20 × 10,000.
Keep in mind
The chosen 0.5% example is educational, not a personalised risk recommendation. Gaps can exceed the allowance.
Your turn
Repeat the example with a 40-pip stop and the same USD 8 price-move budget. Explain why quantity changes.
A quick check before we move on
What happens to quantity if stop distance doubles and the cash budget stays fixed?
- It stays unchanged
- It halves, before rounding and costs
- It doubles
Check answer
It halves, before rounding and costs Twice the loss per unit requires half as many units to keep the same planned price-move loss.
Sources and further reading
Content reviewed: 29 October 2026
Educational material with hypothetical examples. Trading can cause substantial losses. A course, pattern, stop order or past result cannot guarantee a profit or limit every loss. Practise in simulation and check current rules and product terms in your jurisdiction.
