Most blown accounts come not from a bad entry but from position size. The same entry with a 0.5 lot and a 5 lot gives a calm day or a lost account. So I fix risk in money and calculate the lot from it.
The formula:
lot = risk in money / (stop in points x point value per 1 lot)
An EURUSD example. Deposit 10,000 USD, risk per trade 1%, that is 100 USD. Stop 20 points, point value for 1 lot 10 USD.
- Risk: 10,000 x 1% = 100 USD.
- Loss on 1 lot at the stop: 20 x 10 = 200 USD.
- Lot: 100 / 200 = 0.50.
If the stop is hit, you lose 100 USD, exactly the planned 1%. The distance to the stop is set by the market (beyond the extreme, beyond the swept liquidity), not by a wish to fit a bigger lot. A wider stop means a smaller lot.
What to check:
- Gold, indices, oil. Their point value is different. In MT5 open "Contract specification": contract size and tick value.
- Spread and slippage. A 5-point stop with a 2-point spread is no longer 1% risk.
- Margin. The lot from the formula must fit the free margin with a reserve.
- Several trades at once. Three 1% positions in the same direction is 3% risk.
Common mistakes:
- A fixed lot on all instruments and stops.
- Raising the lot after a losing streak to "win it back". What drawdown is and how much is needed to recover I covered here: drawdown recovery math.
- Moving the stop further while keeping the same lot.
A sensible range for most strategies is 0.5-1% per trade. Ten losses in a row at 1% is about -10%, and the account stays workable. On a loss as the price of information: why a loss is a bill for information.
Need a lot calculator indicator, or an EA that sizes the lot from a risk percentage, for MT4/MT5? Tell me the task: kovalev.trade/development
#trading #riskmanagement #positionsizing #MT5 #risk