Lot size is how much of an instrument you are trading. It decides what a single pip of movement is worth to you, which means it decides how much you lose when the stop is hit.
A standard lot is 100,000 units of the base currency. A mini lot is 10,000, a micro lot is 1,000. In MetaTrader you type these as 1.00, 0.10 and 0.01.
That much is easy to look up. The part that goes wrong is choosing the number.
The only calculation that matters
You do not pick a lot size. You pick a risk, and the lot size falls out of it.
Lot size = Risk in account currency ÷ (Stop distance in pips × Pip value per lot)
Three inputs. Two are yours and one comes from the signal.
Risk in account currency. What you are willing to lose on this trade. If you risk one per cent of a $5,000 account, that is $50. Fixed, decided in advance, the same on every trade.
Stop distance in pips. From the signal. Entry 1.2650, stop 1.2590, that is sixty pips.
Pip value per lot. What one pip is worth on one standard lot of that instrument, expressed in your account currency. This is the input that causes all the trouble.
Worked example, the easy case
USD account. EURUSD. Risk one per cent of $5,000, so $50. Stop sixty pips.
On EURUSD, a pip on one standard lot is $10, because the quote currency is the dollar and your account is in dollars. No conversion.
50 ÷ (60 × 10) = 0.083 lots
Round to your broker's step, usually 0.08. Done.
Worked example, the one that catches people
Same account, same risk, but the signal is GBPJPY. Entry 189.40, stop 188.95. That is forty-five pips.
GBPJPY is quoted in yen. A pip on one standard lot is ¥1,000. Your account is in dollars. So before you can use that number you have to convert yen into dollars at the current USDJPY rate.
At 157.00, ¥1,000 is about $6.37.
50 ÷ (45 × 6.37) = 0.174 lots
Round to 0.17.
Now imagine doing that at three in the morning, half awake, with the price moving. The step people skip is the conversion, and skipping it means using $10 instead of $6.37. That gives 0.111 lots, about a third smaller than intended. You will not notice, because the trade looks fine. You just quietly risked 0.6% instead of 1%, forever, on every yen pair.
The error goes the other way too. A euro-denominated account trading a dollar pair, with the conversion missed in the other direction, over-sizes.
Why gold breaks people's intuition
XAUUSD does not behave like a currency pair and the conventions are inconsistent between brokers, which is a genuinely poor situation that nobody is fixing.
One "lot" of gold is usually 100 ounces. Whether a "pip" means $0.10 or $0.01 of price movement depends on your broker's digit convention. Get that wrong by a factor of ten and your position is ten times the size you meant, which is not a rounding error, it is an account.
If you trade gold, the one thing worth doing is placing a 0.01-lot trade and watching what a one-dollar move in the price does to your profit and loss. That tells you your broker's convention in thirty seconds and it is more reliable than anything written in their documentation.
Fixed lots is not risk management
Plenty of people set 0.10 lots and leave it there. It feels controlled. It is not.
With a fixed lot size, your risk per trade is entirely determined by the stop distance of whatever signal happens to arrive. A twenty-pip stop risks one amount. An eighty-pip stop on the same lot size risks four times as much. Over a month of mixed signals your risk per trade varies by a factor of four or five, in a pattern you did not choose and are not tracking.
Worse, the correlation runs the wrong way. Wide stops usually mean volatile conditions. So fixed lots quietly puts the most money at risk exactly when the market is least predictable.
The four mistakes I see most
Sizing off balance when equity is what matters. If you have open positions running at a loss, your balance is not what you can afford to lose against. Equity is.
Ignoring the broker's minimum and step. A calculation returning 0.034 lots on a broker with a 0.01 step and a 0.01 minimum rounds to 0.03. That is fine. The same calculation on a broker with a 0.10 minimum cannot be honoured at all, and what your platform does in that case is worth knowing before it happens.
Sizing the whole trade when the entry is a zone. If you are scaling into an entry range across several orders, each order carries part of the risk. Sizing each one as though it were the whole position multiplies your exposure by the number of layers.
Doing it under time pressure. Every error above is more likely at speed. That is the actual argument for automating it, and it is not about being bad at arithmetic. It is that arithmetic under pressure, repeatedly, at unsociable hours, has a failure rate, and that failure rate has a cost.
How to remove the problem
Decide the risk percentage once, when you are calm and not in a trade. Then have something else solve the volume, per signal, from that signal's own stop distance, in your account currency.
That is what position sizing automation is for. It is not a clever feature. It is the removal of a repeated manual calculation that has a known error rate and a direct cost, done at the worst possible moment.
TTMT solves volume from your configured risk, using the stop distance on the signal in front of it and the conversion for your account currency. You set the percentage. It does the rest, the same way every time.
Related: what a signal copier is, and what slippage really costs a signal follower.
Start a free 7-day trial at telegramtometatrader.com.
