Position Sizing from Account Risk Percentage and Stop Distance

Summary

This module calculates trade size so that the loss at a specified stop price corresponds to a chosen percentage of the account deposit. The described inputs are the risk percentage and stop-loss price; the calculation converts the permitted cash loss into lots using the broker’s instrument specifications. This is a form of fixed-fractional risk sizing: position size depends on both the account amount at risk and the distance from entry to the stop.

The example passes a 1.5% risk setting and a stop price of 1.08500 to a sell order, then submits a trade if the returned lot size is positive. The document does not show the calculation implementation or explain how it handles contract size, tick value, currency conversion, commissions, slippage, or minimum lot increments. Therefore, the result depends on accurate broker specifications and the order’s actual fill and stop execution; a percentage target does not guarantee a maximum realized loss.

Key ideas

• The module sizes a position so the planned stop loss represents a chosen fraction of account equity or deposit.
• It uses the risk percentage, stop price, and broker instrument specifications to derive lot size.
• The example uses a 1.5% risk setting for a sell order with a stop at 1.08500.
• Actual losses may differ from the planned amount because the excerpt does not address execution costs or gaps.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.