Position Sizing from Risk Percentage and Stop Distance

Summary

The document describes a position size calculator for MetaTrader 4 that determines lot size from a trader’s chosen percentage risk and stop-loss distance. It offers two ways to set that distance: an Average True Range ratio or a fixed number of points. The basic lesson is that position size should adjust to the distance between entry and stop so the selected risk percentage can guide the trade size.

The calculator uses points, with ten points equaling one pip, and is described as applicable to currency pairs, indices, and commodities. Example chart references are given for EURAUD on a four-hour chart and US500 on a one-hour chart, but no calculations or performance evidence are included. The document does not specify how account equity, contract specifications, or trading costs enter the sizing calculation, so those details would need to be checked before relying on the output.

Key ideas

• Position size is calculated using a chosen risk percentage and stop-loss distance.
• The stop can be defined with an Average True Range ratio or a fixed point amount.
• The tool measures distance in points, with ten points corresponding to one pip.
• The document gives chart examples but reports no sizing results or performance tests.

Tags

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