Working out position size
What you learn in 3 minutesThis lesson shows how to turn a risk amount in rupees into a position size in lots. You need three numbers: the money you are willing to lose on the trade, the stop distance in pips, and the value of one pip for one standard lot. The order matters. Risk in money, divided by the stop distance, divided by the pip value.
Working out 0.08 lots from a 25-pip stop
| Step | Amount | Note |
|---|---|---|
| Risk in money | ₹20 | This is the amount you decide you can lose on this one trade. It is a choice, not a market figure. |
| Stop distance in pips | 25 pips | The distance from your entry price to your stop loss, measured in pips. On USD/INR around 83.2500, one pip is 0.0001. |
| Pip value for one standard lot | ₹10 | One standard lot is 100,000 units. 100,000 multiplied by 0.0001 equals ₹10 per pip. |
| Risk divided by stop distance | ₹0.80 per pip | ₹20 divided by 25 pips equals ₹0.80 for each pip of movement. |
| Position size | 0.08 lots | ₹0.80 per pip divided by ₹10 per pip per standard lot equals 0.08 lots. |
Your broker may round the position size to the nearest allowed step, such as 0.01 lots. Brokers also differ in spreads, commissions and how they quote pip value for USD/INR, so the final figure on your platform may not match this exactly. Always check the contract specifications your broker provides.
The mistake people make here
The common mistake is to pick a lot size first because it feels familiar, then place the stop wherever the chart seems to allow. That reverses the method. If you start with 0.50 lots and a 25-pip stop, your risk is 0.50 multiplied by 25 multiplied by ₹10, which is ₹125, not ₹20. Instead, decide the rupee risk and the stop distance before you look at lot sizes. Then divide, and let the answer tell you the size.Check yourself
You are willing to risk ₹50 on a trade. Your stop is 40 pips away. One pip on a standard lot of USD/INR is ₹10. What position size does the method give?
₹50 divided by 40 pips equals ₹1.25 per pip. ₹1.25 divided by ₹10 per pip per standard lot equals 0.125 lots. Your broker may round this to 0.12 or 0.13 lots.
You risk ₹30 with a stop 15 pips away. What is the risk per pip, and what lot size follows?
₹30 divided by 15 pips equals ₹2 per pip. ₹2 divided by ₹10 per pip per standard lot equals 0.20 lots.
If you trade 0.10 lots on USD/INR and your stop is 20 pips away, how much money is at risk?
0.10 lots is one tenth of a standard lot, so one pip is worth ₹1. 20 pips multiplied by ₹1 equals ₹20 at risk.