Most traders spend hours looking for the perfect entry and seconds deciding how big the trade should be. On gold, where the price can move several dollars in minutes, position size often decides whether a losing trade is a small setback or a serious drawdown.
The three numbers you need
- Account balance: the money in your trading account.
- Risk per trade: the percentage of that balance you accept to lose if the stop is hit. Many traders use 0.5% to 2%.
- Stop-loss distance: how far your stop is from your entry, in dollars or pips.
How gold is quoted
With most brokers, one standard lot of XAUUSD is 100 troy ounces. A $1.00 move in the gold price changes the value of one standard lot by $100. Many platforms count one pip as a $0.10 move, so one pip is worth $10 on a standard lot, $1 on a mini lot (0.10) and $0.10 on a micro lot (0.01). Contract sizes can differ, so always check your broker’s symbol specification.
The position size formula
Lot size = (account balance × risk %) ÷ (stop-loss distance in dollars × 100)
Worked example
Say you have a $5,000 account and risk 1% per trade, which is $50. Your stop loss is $10 below your entry, or 100 pips. A $10 move costs $1,000 on one standard lot, so your position size is $50 ÷ $1,000 = 0.05 lots. If the stop is hit, you lose about $50, plus spread and any commission.
What if the stop needs to be wider?
With the same account and risk but a $20 stop, the result is $50 ÷ $2,000 = 0.025 lots, which you round down to 0.02 lots. A wider stop means a smaller position, while the amount at risk stays the same.
Common position sizing mistakes
- Using the same lot size on every trade, whatever the stop distance.
- Moving the stop further away after entering the trade.
- Forgetting spread, commission and overnight swap costs.
- Rounding the lot size up instead of down.
- Increasing risk after a losing streak to win the money back.
Let the calculator do the maths
Our free gold position size calculator works this out for you. Enter your balance, your risk percentage and your stop distance in pips, and it shows the lot size, the amount at risk and the lot size for other stop distances.
Key takeaway
Decide what you are willing to lose before you decide how much to buy or sell. Fix your risk per trade, measure your stop distance, and let the position size follow from those two numbers on every XAUUSD trade.