Lessons › Advanced track › Position sizing across instruments
World 10 · Advanced track · lesson 5 · level 4
Position sizing across instruments
Every market has a 'money per point' number, and once you know it the same sizing formula works everywhere.
In one line
The same 1% risk can mean 50 shares, 8 mini lots or not even one futures contract. Why?
Explained simply
Different markets are like different ride tokens at a fair: a small token, a big token and a giant token. Once you know how much each token is worth, you can work out how many to use for the same amount of risk. The 'money per point' number is that token value.
The lesson
The general formula is: size = money at risk / (stop distance x value per point for one unit). For one share the value per point is 1, for one standard EUR/USD lot a pip is worth 10 US dollars, and for a futures contract it is the contract's point value, such as 5 dollars per index point for the Micro E-mini S&P 500. Always round down to whole shares, lots or contracts, which can leave you a little under-sized. If even one unit risks too much, the right answer is to skip the trade or use a smaller contract.
A worked example
Illustrative example: a 20,000 dollar account risks 1%, which is 20,000 x 1 / 100 = 200 dollars. Shares with a 4-dollar stop: 200 / (4 x 1) = 50 shares. EUR/USD with a 25-pip stop at 10 dollars per pip per standard lot: 200 / (25 x 10) = 0.8 lots, which is 0.8 x 10 = 8 mini lots. Micro E-mini S&P 500 with a 20-point stop at 5 dollars a point: 200 / (20 x 5) = 2 contracts. The full E-mini at 50 dollars a point gives 200 / (20 x 50) = 0.2, which rounds down to 0, so that trade is skipped.
The same idea at four levels
- Beginner. Position size tells you how many units to trade so a stop-out loses only your planned amount.
- Foundation. The formula is size = money at risk / (stop distance x value per point).
- Intermediate. Know the value per point: 1 per share, 10 dollars per pip for a standard EUR/USD lot and 50 dollars per point for an E-mini S&P 500 future.
- Advanced. Always round down, never up, and if one unit is too big for your risk, use a micro contract or skip the trade.
- Expert. Watch currency conversions and contract multipliers, such as 100 yen per point on a Nikkei 225 mini future, and allow for slippage when markets can gap past your stop.
Mistakes to avoid
- Using the share formula for futures or forex without the value per point.
- Rounding up to a whole contract and breaking the risk limit.
- Forgetting to convert the value per point into your account's currency.
Check yourself
What does position sizing decide?
How many units to trade so a stop-out loses only your planned amount. Size turns your risk budget into units.
For one share, what is the value per point?
1. A 1-point move in one share is 1 unit of money.
You risk 200 dollars with a 4-dollar stop on a stock. How many shares?
50. 200 divided by 4 is 50.
What should you do if one contract risks more than your limit?
Skip the trade or use a smaller contract. Your limit comes first.
Risk 200 dollars, a 25-pip stop and 10 dollars per pip per standard lot. What size?
0.8 lots. 200 divided by 250 is 0.8.
Goal of this lesson: Size positions correctly for shares, forex lots, futures contracts and crypto using the value per point.