The short answer
Decide how much money you are willing to lose on one trade, put your stop loss where the trade idea is proven wrong, and then size the lot so that a stop-out costs you only that amount. Do it in that order, every time.
Step 1: Decide how much you can lose per trade
Many traders keep the risk on a single trade at 1% of the account or less. It is a common guideline, not a rule that guarantees anything. The reason is simple arithmetic: small losses are easy to recover from, and a losing streak (every trader has them) does not end the account.
Write the number in dollars before you look at the chart. For example, 1% of a $1,000 account is $10. If you trade under a funded-account or prop-firm program, check its daily and total loss rules too, and keep your per-trade risk well inside them.
Step 2: Place the stop where the idea is wrong
A stop loss belongs at the level where your reason for the trade no longer holds, for example beyond the swing high or low that your idea depends on. It should not be placed at an arbitrary distance because it "feels" affordable.
If the chart needs a wider stop, you do not widen your risk. You reduce the lot size. A wider stop with a smaller lot can risk exactly the same dollars as a tight stop with a bigger lot.
Step 3: Turn risk and stop into a lot size
For XAUUSD on an account in US dollars, with a contract size of 100 ounces per 1.00 lot, a $1 move in gold equals $100 per lot.
Worked example
Balance $1,000, risk 1%, stop loss $5 away, contract size 100 oz. Risk = $1,000 x 1% = $10. Lots = $10 / ($5 x 100) = 0.02 lot. If the stop is hit you lose about $10 (before spread and slippage).
Always round the lot size down to your broker's lot step, never up. These four cases show how rounding changes the real risk:
| Balance | Risk | Stop | Risk in $ | Exact lots | Lot used | Real risk |
|---|---|---|---|---|---|---|
| $1,000 | 1% | $5 | $10 | 0.02 | 0.02 | $10.00 |
| $5,000 | 1% | $8 | $50 | 0.0625 | 0.06 | $48.00 |
| $10,000 | 0.5% | $3 | $50 | 0.1667 | 0.16 | $48.00 |
| $200 | 1% | $5 | $2 | 0.004 | below 0.01 | $5.00 at 0.01 lot (2.5%) |
Skip the arithmetic with our lot size calculator, and check your broker's contract specification for the contract size, lot step and minimum lot, because they differ between brokers.
Leverage changes your margin, not your risk
The dollars you lose when the stop is hit depend on the lot size and the stop distance. Leverage only decides how much margin the broker blocks to hold the position. The danger is that high leverage makes it easy to open a position far too big for your account.
An illustration with a hypothetical gold price of $3,000 (for arithmetic only, not a market quote) and a 0.10 lot position (10 oz):
| Leverage | Margin required |
|---|---|
| 1:50 | $600 |
| 1:100 | $300 |
| 1:500 | $60 |
In all three cases a $5 move against you costs the same $50 on this position. Keep plenty of free margin, because margin used is not the amount you risk, but it is what decides whether the broker closes your trades when the account runs low.
Risk-reward and the win rate you need
Risk-reward compares what you stand to gain with what you risk. The lower the reward relative to the risk, the more often you have to win just to break even. Before costs, the break-even win rate is 1 / (1 + R), where R is the reward divided by the risk.
| Risk : Reward | Win rate needed to break even |
|---|---|
| 1 : 1 | 50% |
| 1 : 1.5 | 40% |
| 1 : 2 | 33.3% |
| 1 : 3 | 25% |
Spread, commission and slippage push the real number higher. A bigger ratio on paper does not make a setup better: the target still has to be a level price can realistically reach. Check a trade with the risk reward calculator.
Why small risk matters: losing streaks and recovery
This is arithmetic, not a prediction. It shows what ten losing trades in a row would do at different risk levels:
| Risk per trade | Account left after 10 losses in a row | Drawdown |
|---|---|---|
| 1% | 90.4% | 9.6% |
| 2% | 81.7% | 18.3% |
| 5% | 59.9% | 40.1% |
| 10% | 34.9% | 65.1% |
Losses are also harder to recover from than they look, because the gain you need is measured on a smaller balance:
| Account drawdown | Gain needed to get back to the start |
|---|---|
| 10% | 11.1% |
| 20% | 25% |
| 30% | 42.9% |
| 50% | 100% |
Gold-specific things to plan for
- News events. Major US economic data and central bank decisions can make gold move quickly and can widen spreads. Know the calendar before you enter, and decide in advance whether you trade through an event.
- Weekend gaps. Price can open away from Friday's close, so a stop may fill at a worse level.
- Large lot value. At 100 oz per lot, one standard lot moves $100 for every $1 in gold. Mistakes get expensive fast, so double-check the lot field before you click.
- Broker differences. Contract size, lot step, minimum lot, spreads and swap vary. Read your broker's specification for XAUUSD.
Pre-trade risk checklist
- I know my risk in dollars before I enter
- My stop is where the idea is wrong, not where it feels comfortable
- I calculated the lot size from risk and stop, I did not guess it
- After rounding, my real risk is within my limit
- My risk-reward target is realistic, not forced
- I know about any major news event coming up and have a plan for it
- My daily loss limit has not been reached
- I am leaving plenty of free margin
Frequently asked questions
Is 1% the right risk per trade?
There is no universal right number. 1% or less is a common guideline because it keeps losing streaks survivable. Your account size, strategy and any funded-account rules matter. If you are new, start smaller than you think you need.
Can I risk more to grow a small account faster?
Higher risk does not improve your edge, it only makes bigger drawdowns more likely (see the tables above). A small account also has the minimum-lot problem, so check your real risk after rounding every time.
Should I use the same lot size on every trade?
A fixed lot ignores the stop distance, so the same lot with a different stop risks a different amount of money. Sizing from your risk keeps the dollar risk consistent.
Does your calculator work with every broker?
It assumes 100 ounces per 1.00 lot by default and lets you edit the contract size. It excludes spread, commission, swap and slippage, and your broker's lot step and minimum lot may differ. Treat the result as an estimate and verify it against your broker's specification.
Check your next trade size
Enter your balance, risk and stop to see the lot size and your real risk.
Open the calculator