Your position size is how much you are trading. It converts a price move into money, and it is the main thing standing between a normal losing trade and a destroyed account.
The unit of size
What a unit of size is called depends on the market.
Lots are the unit in forex and in CFD trading generally.
- A standard lot in forex is 100,000 units of the base currency
- A mini lot is 10,000 units, written as 0.1 lots
- A micro lot is 1,000 units, written as 0.01 lots
The steps are tens. Ten micro lots make one mini lot, and ten mini lots make one standard lot.
Contracts are the unit in futures. Each contract is a specific, exchange-defined quantity of the underlying.
- A full-size contract is the original specification
- An E-mini is a smaller version, commonly a fifth of the full size
- A micro is smaller again, a tenth of the E-mini
Exact values per lot and per contract are covered in the CFDs and Futures guides, since they vary by instrument and by broker.
How size converts a move into money
The formula is the same everywhere:
Result = price move x value per unit of movement x number of units
A worked example on an index CFD, where each point is worth one dollar per contract:
- You buy 3 contracts at 5000
- Price rises to 5020, a move of 20 points
- 20 points x 1 dollar x 3 contracts = 60 dollars gained
Keep the same trade and flip the direction of the move, and you lose 60 dollars.
Why size is the number that matters
Two traders can take the same trade, with the same entry and the same stop, and end up in completely different situations, because one risked half a percent of their account and the other risked thirty percent. Size accounts for the whole difference.
This is why position size is treated as a risk decision rather than a profit decision. Size is not chosen based on how confident you feel, since confidence is not measurable and correlates poorly with results.
How size is chosen properly
The method, in outline:
- Decide what percentage of your account you are willing to lose on this trade
- Convert that percentage into a money amount
- Measure the distance from your entry to your stop loss
- Divide the money amount by the value of that distance per unit
- The result is your position size
The full treatment, including why the percentage should be small and what happens to an account across a losing streak, is in the Risk Management guide. What matters here is the order of operations: risk, then stop distance, then size.
Beginners reverse it, choosing a size that feels exciting and then placing a stop wherever it seems to fit. That sequence guarantees inconsistent risk across trades, which makes results impossible to evaluate.
Key terms
- Position size: how much you are trading
- Lot: the CFD and forex unit of size
- Contract: the futures unit of size
- Micro and mini: smaller versions of the standard unit
- Value per point, pip or tick: what one unit of movement is worth per lot or contract