Position sizing checklist: 7 checks beyond the 1% rule
The Nuqta Markets team · 28 October 2026 · 7 min read · How we write
In short
- Lot = money at risk ÷ (stop in pips × pip value per lot), rounded down.
- Add the spread to the stop distance and convert pip value for JPY and cross pairs.
- Correlated positions add up: two similar trades can be one bigger risk.
"Risk a fixed percentage per trade" is where position sizing starts, not where it ends. Between the percentage and the lot typed into the platform there are seven checks that decide whether the loss at the stop is really the amount planned. This checklist runs them on one trade.
The starting formula
Lot = money at risk ÷ (stop distance in pips × pip value per lot)
The example: a $5,000 account, 1% per trade used as an educational example (so $50), a sell on USDJPY at 150.00 with a 25-pip stop and a typical spread of 1.5 pips.
The seven checks
1. Put the spread inside the stop. A sell closes at the ask, so the real distance at entry is 25 + 1.5 = 26.5 pips. The mechanics are in how to read a bid/ask quote.
2. Use the pip value in your account currency. On USDJPY one pip on one lot is ¥1,000, which at 150.00 is about $6.67, not $10.
3. Round down to the lot step. $50 ÷ (26.5 × $6.67) ≈ 0.283, so 0.28 lot. Rounding up would put the loss above plan.
| Version of the calculation | Lot | Real loss at the stop |
|---|---|---|
| Assumes $10 a pip, no spread | 0.20 | about $35 (0.7%) |
| Correct pip value, no spread | 0.30 | about $53 (1.06%) |
| Correct pip value, spread included, rounded down | 0.28 | about $49 (0.99%) |
Illustrative calculation, not an expectation of results.
The mistake also works the other way. On a pound-quoted pair such as EURGBP, where a pip is worth about $12.70 per lot, assuming $10 a pip makes the real risk about 27% larger than planned. The pip value calculator gives the right figure for every pair.
4. Count correlated positions together. A long EURUSD and a long GBPUSD are both, in large part, a short on the dollar. At 1% each they can behave like close to 2% on one idea. Many written plans cap the total risk per currency, not only per trade.
5. Check margin and effective leverage. 0.28 lot of USDJPY is $28,000 of notional. At 1:100 that ties up $280 of margin, and the effective leverage is 28,000 ÷ 5,000 = 5.6 : 1. Both are worth a glance before opening a second or third trade; the ratios are explained in leverage ratios in numbers.
6. Allow for gaps and slippage. A stop is an order to close at the next available price. Over a weekend or around major data that price can be beyond the stop, so the real loss can exceed the plan. Plans often reduce size or avoid holding through known events.
7. Add up the total open risk. The sum of all open stops in money, plus any daily loss limit the plan has, is the number the account actually faces today. Five trades at 1% each is 5% at risk at the same moment.
The small-account problem
On a $500 account, 1% is $5. A 20-pip stop on EURUSD needs 5 ÷ (20 × $10) = 0.025 lot, which rounds down to 0.02: a real risk of $4, or 0.8%. The 0.01 step makes small accounts lumpy, and the honest fix is to accept the lower risk or wait for a setup with a stop that fits, never to round up. The lot size calculator shows the rounded lot and the real risk together.
In short
Percentage, spread, pip value, rounding, correlation, margin, gaps, total risk: eight lines on a note, and the size is no longer a guess. How sizing interacts with long runs of losses is in risk of ruin.
Questions people also ask
Should a lot size be rounded up or down?
Down. Rounding up makes the loss at the stop larger than planned. On small accounts the 0.01 step can lower the real risk noticeably, which is safer than raising it.
Do EURUSD and GBPUSD count as separate risks?
They often move in the same direction because both are priced against the dollar. Two long positions at 1% each can behave like close to 2% on one idea, so many plans cap the total risk per currency.
What if the minimum lot is still too big?
If 0.01 lot with the required stop risks more than the plan allows, the numbers say the trade does not fit the account. The usual options are a setup with a tighter logical stop or no trade, never removing the stop.
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