Method for calculating position size based on capital, risk, and distance to stop
A lot is the result of a calculation, not the starting point of a trade. Click on the diagram to open it in full size.

What is a lot

Lot — a unit of trading volume. It indicates the size of the position, not the allowable loss. For a currency pair, gold, an index, or a stock, the same numerical volume can represent a completely different contract size and a different price movement value.

The main rule: First, determine the permissible monetary risk and the Stop Loss level, then calculate the position size. Selecting a lot size based solely on account size is insufficient.

Why the same lot does not imply the same risk

The position result depends on contract size, price step, point value, settlement currency, leverage, commission, and the distance from entry to the protective level. These parameters differ not only across asset classes but sometimes also between symbols at different brokers.

For example, the XAUUSD symbol at two brokers may have different minimum volume, contract size, or price step. Therefore, you cannot transfer the usual lot size from a currency pair to gold or an index without checking the specifications.

What to check in MT5

  1. Open the "Market Watch" and locate the required symbol.
  2. Right-click and select “Specification”.
  3. Check the contract size, minimum and maximum volume, volume step, tick size and tick value.
  4. Confirm the profit currency, margin, commission, and swap.
  5. Match your monetary risk with your Stop Loss.

Calculation logic

The simplified sequence looks like this: acceptable loss in money ÷ loss per one unit of volume before Stop Loss = suitable position size. The precise calculation depends on the symbol specification and account currency.

If the Stop Loss is placed farther away, the position size usually has to be reduced. If the protective level is closer, the size can be larger, but only provided that the level itself is chosen based on market logic, not to fit the desired lot.

Entry scheme, Stop Loss and Take Profit for a long position
For a short position, the level direction is mirrored. A level does not guarantee execution without slippage. Click on the diagram to open it in full size.

Before sending the order

  • check the symbol and trade direction;
  • ensure that the lot matches the volume step;
  • evaluate the possible slippage and commission;
  • specify the Stop Loss before opening the position or immediately after execution;
  • do not increase the volume solely to quickly recover the previous loss.

Next: Analyze two materials: Stop Loss and Take Profit; order types in MT5.