How to set risk per trade and position size

Core principle

Decide how much to lose before deciding position size. A common beginner mistake is opening first and choosing a stop later.

Simple steps

Multiply account equity by risk percentage to get allowed loss. Then calculate size using stop distance and pip value.

Example

USD 1000 account, 1% risk per trade, maximum loss USD 10. If stop distance is 50 pips, pip value must not exceed USD 0.2.

Keep records

For every trade, record entry reason, stop distance, planned loss, actual loss, stop movement and rule violations.