By the Anrim Forex Team
Most accounts are not lost to bad analysis. They are lost to trades that were simply too big. One oversized position can wipe out weeks of careful work. This guide shows how to calculate your position size (your lot size) with a simple method that keeps every loss small and known in advance: the 1% rule.
What is the 1% rule?
Before you enter a trade, decide the most you are willing to lose on it, and keep that amount at 1% of your account balance or less. On a $1,000 account, the maximum loss per trade is $10. That means it takes a very long losing streak to seriously damage the account, so you can keep trading and keep learning.
Three steps to calculate your position size
- Set your risk amount: balance × 1%. Example: $1,000 × 1% = $10.
- Measure your stop-loss distance in pips: the gap between your entry price and your stop. Example: sell EUR/USD at 1.1090 with a stop at 1.1125 = 35 pips.
- Calculate the size: lots = risk amount ÷ (pips × pip value per standard lot). On EUR/USD one pip is worth about $10 per standard lot, so $10 ÷ (35 × $10) ≈ 0.03 lots.
A gold (XAU/USD) example
Gold is priced in dollars, and one standard lot is usually 100 ounces, so a $1 move in price is worth about $100 per lot. If you enter at 4000 with a stop at 4040, the distance is $40. With $10 at risk: $10 ÷ ($40 × 100) = 0.0025 lots, which is below the 0.01 minimum. In practice this means a stop that wide does not fit an account that size: wait for a setup with a tighter stop, or skip the trade. Contract specifications can differ between account types, so check the pip value in your platform before you calculate.
A wider stop means a smaller position
A common mistake is to pick the lot size first and then place the stop wherever the account "can take it". Do the opposite: put the stop where it makes sense on the chart (above resistance or below support), then calculate the size that makes a loss at that stop equal 1%. Your risk then stays the same whatever the pair or the stop distance.
Mistakes to avoid
- Opening several trades on correlated pairs (for example EUR/USD and GBP/USD in the same direction), which multiplies your real risk without you noticing.
- Moving your stop further away as price approaches it, which turns a 1% loss into several times that.
- Increasing your size after a loss to "win it back". This is the fastest way to lose an account.
- Treating high leverage as extra profit. Leverage magnifies losses exactly as much as gains.
Common questions
Is 1% right for everyone? It is a common upper limit for beginners. Many traders prefer 0.5% or less, especially at the start or around major news.
What if the calculated size is below 0.01 lots? Your stop is too wide for your balance. Skip the trade or look for an entry with a closer stop. Do not raise your risk.
Does an Islamic swap-free account change the calculation? No. A swap-free account only removes overnight interest charges. Position sizing and risk work exactly the same.
Want to practise this on a swap-free account with a daily rebate? Open an Exness account through Anrim: open an Exness account. Follow our free daily analysis on Telegram, and read the Arabic version of this lesson.
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Anrim Forex Team
Analysts and educators at Anrim Forex, an Exness partner. We write practical lessons on gold, oil and forex.
Trading forex, gold and CFDs carries a high risk of losing money. This content is education, not personal investment advice. Anrim is an Exness partner and may earn a commission when you trade.