Formula
| Item | Expression |
|---|---|
| Acceptable loss amount | Account balance × acceptable loss (%) |
| Right lot size | Acceptable loss amount ÷ (stop-loss distance (pips) × value of 1 pip) |
| Value of 1 pip | Yen cross: 1,000 yen per lot / USD pairs: 10 USD per lot × USD/JPY |
Round down to match your broker's minimum lot size (such as 0.01).
Work out your lot size from the stop-loss distance
Many beginners decide the lot size first and then think about the stop-loss, but the order should be the reverse. First decide how much you are willing to lose on one trade, then divide by the stop-loss distance, and the lot size you should trade is set automatically.
With a balance of 300,000 yen and an acceptable loss of 2%, the acceptable loss is 6,000 yen. With a 20-pip stop-loss on USD/JPY, 1 pip = 1,000 yen per lot, so the right lot size is 0.3 lot.
A guide to the acceptable loss
In money management, 1 to 2% per trade is often cited as a guide, but it varies with your trading style and capital. It matters that you decide for yourself a level at which you will not be wiped out even after a losing streak.
- Under the 2% rule, about 82% of your balance remains even after 10 losses in a row
- The wider the stop-loss distance, the smaller the lot size (the loss amount stays the same)
- Cashback is proportional to trading volume, but do not make it a reason to increase your lots
Points to note
Spread and slippage are not included, so the actual loss will be slightly larger than expected. The tool only performs calculations and does not recommend any particular lot size or trade.