Getting Started

Before opening any trade, it's important to understand Lots, Pips, and Position Size.

These three concepts determine how much money you risk and how much money you can potentially make on every trade.

Many beginners focus only on finding the right entry. However, even the best trade setup can result in unnecessary losses if the position size is too large.

What Is A Pip

A Pip is a unit used to describe how far the price of an asset has moved. Instead of always talking about exact prices, traders use Pips to make market movements easier to compare and communicate.

For example, if a market moves from one price level to another, that movement can be expressed in Pips.

The important thing to understand is: Pips measure distance, not money.

A movement of 100 Pips is the same market movement for every trader. However, the amount of money gained or lost from those 100 Pips depends on the Lot Size being traded.

What Is a Lot?

A Lot describes the size of your trading position and therefore determines how much money you gain or lose for each Pip the market moves. When you open a trade in MetaTrader 5, you'll find a field called Volume. This is where you enter your Lot Size.

Typical Lot Sizes are:

1.00 Lot
0.10 Lot
0.01 Lot

For many major Forex pairs on a USD account, a common rule of thumb is:

1.00 Lot ≈ $10 per Pip
0.10 Lot ≈ $1 per Pip
0.01 Lot ≈ $0.10 per Pip

This means that if the market moves 10 Pips in your favor:

1.00 Lot ≈ $100 profit
0.10 Lot ≈ $10 profit
0.01 Lot ≈ $1 profit

If the market moves 10 Pips against you, the same values would apply as a loss.

The easiest way to remember the relationship is:

Pips tell you how far the market moved.
Lots determine how much money each Pip is worth for your position.

The larger your Lot Size, the more valuable every Pip becomes. This increases both your potential profit and your potential loss.

It is important to understand that the $10 / $1 / $0.10 rule is only a common Forex example and not a universal rule for every market. MetaTrader defines one Lot according to the contract size of the individual instrument, and brokers can use different contract, tick-size, and tick-value specifications.

For markets such as Gold, Indices, Oil, or other CFDs, always check the instrument specifications or use a Position Size Calculator rather than assuming the same Pip value.

How Lot Size Changes Your Profit and Loss

Imagine two traders enter the same trade at exactly the same price. Both traders catch a movement of 100 Pips:

Trader A uses:

0.10 Lot

Trader B uses:

1.00 Lot

Both traders experienced exactly the same price movement. However, Trader B's position is ten times larger. Therefore, the financial result is also approximately ten times larger. This is why the number of Pips alone does not tell you how much money a trade made. You always need to know the Lot Size as well.

Forex Lot Example

For many major Forex pairs on a USD account, a useful rule of thumb is:

1.00 Lot ≈ $10 per Pip
0.10 Lot ≈ $1 per Pip
0.01 Lot ≈ $0.10 per Pip

Example:

EUR/USD moves:

10 Pips

With 0.10 Lot, this movement would be worth approximately:

$10

With 1.00 Lot, the same 20 Pip movement would be worth approximately:

$100

This is a useful guideline for understanding the relationship between Pips and Lots. However, the exact Pip Value can vary depending on the currency pair, account currency, and broker.

Gold Lot Example

For Gold, the relationship between Lot Size and price movement works differently than with many Forex pairs. A simple way to understand it is by looking at how much a $1.00 move in Gold is worth.

A common example is:

1.00 Lot ≈ $100 per $1.00 Gold move

0.10 Lot ≈ $10 per $1.00 Gold move

0.01 Lot ≈ $1 per $1.00 Gold move

Example:

Gold moves from:

4,100.00 to 4,101.00

With 0.10 Lot, this movement would be worth approximately:

$10

With 1.00 Lot, the same 20 Pip movement would be worth approximately:

$100

What Is Position Size?

Your Position Size is the final size of your trade. It determines how many Lots you should trade for a specific setup.

Your Position Size is calculated using two key components:

• The distance between your Entry Price and Stop Loss (measured in Pips)

• The Lot Size

Before opening a trade, you first need to know how many Pips your Stop Loss is away from your Entry Price. This tells you how much room the trade has before it reaches your Stop Loss.

Next, you choose how much of your account you are willing to risk. Most traders risk between 1% and 3% of their account on a single trade. This topic is explained in detail in our Risk Management Guide.

Now you combine both pieces of information.

Since you already know how much one Pip is worth for different Lot Sizes, you can calculate which Lot Size matches your planned risk.

For example:

• A small Stop Loss usually allows a larger Lot Size.

• A large Stop Loss usually requires a smaller Lot Size.

This keeps your overall risk consistent, even though every trade is different. The easiest way to calculate your Position Size is by using a Position Size Calculator. Simply enter: The calculator will automatically calculate the correct Lot Size for your trade.

This Lot Size is your Position Size, which you then enter into the Volume field in MetaTrader 5 before opening the trade.

Over time, you'll also develop a natural feeling for which Lot Size fits a certain setup. As you become more familiar with different Stop Loss distances and Pip movements, you'll start to recognize more quickly whether a position should be smaller or larger.

Practical Examples

The following examples use the same account size and the same risk. The only thing that changes is the distance between the Entry and the Stop Loss.

Account Balance: $10,000
Risk per Trade: 1% ($100)

Example 1

Asset: XAU/USD
Entry: 4,100.00
Stop Loss: 4,095.00
Stop Loss Distance: $5.00
Account Balance: $10,000
Risk: 1% = $100

As explained earlier in this guide, on many Gold setups:

1.00 Lot ≈ $100 for every $1.00 move in Gold.

Since the Stop Loss is $5.00 away from the Entry, a position of 1.00 Lot would lose approximately:

5 × $100 = $500

But in this example, the maximum planned loss is only $100.

So the Lot Size needs to be reduced until the full $5.00 Stop Loss movement equals approximately $100.

That results in:

0.20 Lot

With 0.20 Lot, every $1.00 move in Gold is worth approximately $20.

Example 2

Asset: XAU/USD
Entry: 4,100.00
Stop Loss: 4,080.00
Stop Loss Distance: $20.00
Account Balance: $10,000
Risk: 1% = $100

Again:

1.00 Lot ≈ $100 for every $1.00 move in Gold.

Because the Stop Loss is now $20.00 away, a position of 1.00 Lot would lose approximately:

20 × $100 = $2,000

That is far above the planned $100 risk.

So the Lot Size needs to be reduced significantly.

The correct Position Size is:

0.05 Lot

With 0.05 Lot, every $1.00 move in Gold is worth approximately $5.

If the market moves the full $20.00 against the trade:

20 × $5 = $100

So even though the Stop Loss is four times wider than in the first example, the maximum planned loss remains approximately the same. This is why a wider Stop Loss requires a smaller Lot Size.

Example 3

Asset: EUR/USD
Entry: 1.10000
Stop Loss: 1.09900
Stop Loss Distance: 10 Pips
Account Balance: $10,000
Risk: 1% = $100

As explained earlier in this guide, for many major Forex pairs:

1.00 Lot ≈ $10 per Pip.

Since the Stop Loss is 10 Pips away, a position of 1.00 Lot would lose approximately:

10 × $10 = $100

This matches the planned maximum risk of $100.

Therefore, the correct Position Size is:

1.00 Lot

With 1.00 Lot, every Pip is worth approximately $10.

If the market moves the full 10 Pips against the trade:

10 × $10 = $100

So the maximum planned loss is approximately $100, exactly as intended.

This example shows how the Position Size is determined by combining the Stop Loss distance with the value of one Pip. If the Stop Loss were larger, the Lot Size would need to be smaller. If the Stop Loss were smaller, the Lot Size could be larger while keeping the same level of risk.

Position Size with Traidx Signals

Every Traidx signal already provides the most important information you need:

• Entry Zone

• Stop Loss

• Take Profit Levels

The only thing left for you to calculate is your Position Size.

Simply measure the distance between the Entry and the Stop Loss, choose how much of your account you want to risk, and use a Position Size Calculator to determine the correct Lot Size.

Once you've calculated your Position Size, enter the Lot Size into the Volume field in MetaTrader 5 before opening the trade.

One Position or Multiple Positions?

After calculating your total Position Size, you can decide how you want to execute the trade. Let's use the same example from our How to Trade Traidx Signals Guide:

Calculated Position Size: 1.00 Lot

You now have two different ways to open and manage the position.

Option 1 – One Position

You open one single trade with:

1 × 1.00 Lot

Once TP1 is reached, you close approximately 35–55% of the original position.

For example:

Close at TP1: 0.35–0.55 Lot

The remaining position is approximately:

0.45–0.65 Lot

At the same time, the Stop Loss of the remaining position is moved toward the Entry Zone / Break Even.

If TP2 is reached, you close another 15–25% of the original position.

For example:

Close at TP2: 0.15–0.25 Lot

This leaves approximately:

0.20–0.50 Lot

The remaining part of the trade is then left open until either TP3 is reached or the moved Stop Loss closes the position.

With this method, you only manage one trade, but you need to manually take partial profits as the individual targets are reached.

Option 2 – Multiple Positions

Instead of opening one 1.00 Lot position, you can split your total Position Size into three separate trades.

For example:

Trade 1: 0.33 Lot
Trade 2: 0.33 Lot
Trade 3: 0.34 Lot

Your total Position Size is still:

1.00 Lot

At TP1, you can close the first trade completely. If desired, you can also take a small additional partial profit from one of the remaining positions.

The Stop Loss of the remaining trades is then moved toward the Entry Zone / Break Even.

At TP2, the second position can be closed completely. You can also reduce a small part of the final position if desired.

The third trade is left running until either TP3 is reached or the moved Stop Loss closes the position.

The advantage of this method is that you can assign different Take Profit targets to the individual positions from the beginning, meaning less manual management may be required later.

Both methods start with exactly the same total Position Size:

1.00 Lot

The only difference is how you split and manage that position after entering the trade. For the complete Traidx trade management strategy, including TP1, TP2, TP3, partial profits, and moving the Stop Loss to Break Even, read our How to Trade Traidx Signals Guide.

Where to Find the Lot Size in MetaTrader 5

When opening a trade in MetaTrader 5, you'll find a field called Volume. This is where you enter your Lot Size.

Before pressing Buy by Market or Sell by Market, always verify that the Volume matches your position size calculation.

Common Beginner Mistakes

When calculating your Position Size, beginners often make the same mistakes.

Avoid the following:

• Choosing a Lot Size based on how much profit you want to make.

• Copying another trader's Lot Size.

• Using the same Lot Size for every trade.

• Forgetting to calculate the Stop Loss distance first.

• Entering the wrong Lot Size by accident (for example, entering 1.00 Lot instead of 0.10 Lot).

• Skipping the Position Size calculation completely.

Remember:

The Lot Size should always be calculated before opening the trade.

Final Notes

Understanding Pips, Lots, and Position Size is one of the most important foundations of trading.

Always remember:

• Pips measure how far the market moves.

• Lots determine how much each Pip is worth.

• Your Position Size is the final Lot Size you trade after considering your Stop Loss distance and chosen risk.

At first, calculating your Position Size may seem unfamiliar. However, after placing enough trades, you'll naturally develop a better feeling for how different Stop Loss distances affect your Lot Size. Even then, it's always a good habit to verify your calculations with a Position Size Calculator before entering a trade.