How to Calculate Lot Size From Your Stop Loss: Formula and Two Examples

A simple position size formula from risk per trade and stop distance, with worked examples for EUR/USD and gold, and three common lot size mistakes.

Most losses of new traders come not from a bad entry but from the wrong size. The same signal can be a reasonable risk at 0.02 lots and a dangerous one at 0.5. So the lot is not chosen by feel; it comes from two numbers: how much you accept to lose on the trade and where the stop is.

The formula

Lot = Risk in money ÷ (Stop distance × Value of one price unit per 1 lot)

• Risk in money is the share of your deposit you accept to lose if the stop is hit. A common guide is 0.5 to 2% of the deposit per trade.
• Stop distance is the difference between the entry price and the stop loss.
• Value per 1 lot is how much money one unit of price movement makes or costs at a size of 1 lot. You find it in your broker's instrument specification.

Example 1. EUR/USD

Deposit 2,000 USD, risk 1% = 20 USD. Entry 1.0850, stop 1.0825: 25 pips. On EUR/USD one pip on 1 standard lot is worth about 10 USD.

Lot = 20 ÷ (25 × 10) = 0.08 lots.

If the stop is hit, you lose about 20 USD, exactly the planned 1%.

Example 2. Gold (XAU/USD)

Same deposit, risk 20 USD. Entry 4000.00, stop 3990.00: a 10 USD price distance. At most brokers 1 lot of gold is 100 ounces, so a 1 USD move is worth 100 USD per lot and a 10 USD move is 1,000 USD.

Lot = 20 ÷ (10 × 100) = 0.02 lots.

Note that with the same deposit and the same risk, the gold size is four times smaller than on EUR/USD. That is normal: gold moves more.

Three common mistakes

1. The same lot on every instrument. 0.1 lots on EUR/USD and 0.1 lots on gold are completely different risks.
2. Ignoring the contract size. It can differ between brokers and account types (for example 100 or 10 ounces per gold lot, different index contracts). Check the specification in your terminal.
3. Moving the stop after the calculation. If you widened the stop, the risk grew: recalculate the lot.

Also keep in mind

• Spread and commission make the real loss at the stop slightly larger.
• With several open trades on related instruments (for example gold and silver), the total risk adds up.
• Your broker's minimum lot step may not allow the exact size; round down.

Trading financial markets carries a high risk of losing money. The right position size does not make a trade profitable, but it keeps one mistake from wiping out the account.