Forex money management: how to set risk per trade, lot size and margin level (beginner guide)

Conclusion: decide your risk per trade first

Money management is not a way to win. It is a way to set the upper limit of your trade size in advance, so that one loss does not shrink the account too much.

This guide does not cover entry timing or market views. It uses only three calculations: loss amount, lot size and margin.

• Decide the amount you accept losing on one trade, then work back to the lot size from the stop-loss distance
• Lot size = risk per trade ÷ (stop-loss in pips × value of 1 pip per lot)
• Even if the required margin is covered, a large lot size brings a forced close closer after a small adverse move
• What sets your limit is account balance and trade size, not the maximum leverage
• All examples use hypothetical figures. Check the real conditions in your trading platform and the account terms

How to do money management: 5 steps to work out the lot size

Step 1: Check the account balance. Look at the equity (the balance reflecting open profit and loss) of the account you trade with. Do not deposit living expenses or money you will need soon.

Step 2: Decide the loss you accept on one trade. Choose a percentage of the balance and convert it to an amount. For example, 2% of a 100,000 JPY balance is 2,000 JPY.

Step 3: Decide the stop-loss distance in pips. Before placing the order, decide how many pips against you will trigger the exit. How to choose the distance depends on the method, so this guide does not cover it.

Step 4: Calculate the lot size. Divide the risk per trade by (stop-loss distance × value of 1 pip per lot). If it does not divide evenly, round down.

Step 5: Check required margin and margin level. Look at the required margin for the calculated lot size on the order screen. For ways to place a stop-loss order, see the guide on order types on this site.

Formulas used (MetaQuotes MT5 official help and the same definitions as the columns on this site, checked on 23 October 2026): 1 pip per lot: for USD/JPY, 1 lot (100,000 units) is 1,000 JPY per pip. Maximum lot size: risk per trade ÷ (stop-loss in pips × value of 1 pip per lot). Required margin: lots × contract size ÷ leverage (multiply by the exchange rate to convert to JPY). Margin level: equity ÷ required margin × 100 (%).

1 lot = 100,000 units is the common definition. The contract size can differ by account type and instrument, so check the instrument specification in your trading platform. For the formulas in a quick-reference table, see the column on pips, lot and required margin calculation on this site.

• Step 1: check the equity of the account you trade with
• Step 2: set risk per trade as an amount (for example 2% of 100,000 JPY = 2,000 JPY)
• Step 3: set the stop-loss distance in pips before ordering
• Step 4: lot size = risk per trade ÷ (stop-loss pips × 1 pip value per lot), rounded down
• Step 5: check the required margin and margin level on the order screen

Is 2% the right risk per trade? One commonly cited idea

The idea that one loss should stay within 1 to 2% of the account balance is often cited. It is only one example, not a correct answer or a recommendation.

The right percentage differs by balance, spare living funds and tolerance for losses. The smaller the percentage, the smaller the lot size you can build with the same stop-loss distance.

Comparison by percentage (hypothetical figures: balance 100,000 JPY, stop-loss 20 pips, USD/JPY, 1 lot = 100,000 units): 1%: risk 1,000 JPY, maximum 0.05 lot. 2%: risk 2,000 JPY, maximum 0.1 lot. 3%: risk 3,000 JPY, maximum 0.15 lot.

Note: the percentage does not guarantee a maximum loss. The calculated loss excludes spread and slippage. When prices jump, a position may be closed away from the stop-loss price.

• 1%: risk 1,000 JPY, maximum 0.05 lot
• 2%: risk 2,000 JPY, maximum 0.1 lot
• 3%: risk 3,000 JPY, maximum 0.15 lot

How to decide lot size: three hypothetical examples

All three examples use hypothetical figures. They assume USD/JPY, 1 lot = 100,000 units and 1,000 JPY per pip for 1 lot. Spread and commission are not included. They are not trade recommendations.

Example A: balance 100,000 JPY, 2% (2,000 JPY), stop-loss 20 pips. Calculation: 2,000 ÷ (20 × 1,000). Maximum lot size: 0.1 lot.

Example B: balance 300,000 JPY, 1% (3,000 JPY), stop-loss 30 pips. Calculation: 3,000 ÷ (30 × 1,000). Maximum lot size: 0.1 lot.

Example C: balance 50,000 JPY, 2% (1,000 JPY), stop-loss 50 pips. Calculation: 1,000 ÷ (50 × 1,000). Maximum lot size: 0.02 lot.

Checking Example A backwards: 0.1 lot is 10,000 units, so 1 pip is 100 JPY. A 20-pip move against you gives 100 JPY × 20 = 2,000 JPY, which matches the risk per trade.

Example B has a balance three times larger but half the percentage, so the lot size is the same as Example A. A larger balance does not always mean a larger lot size.

Note: when even the minimum lot exceeds your risk. In Example C, a wide stop-loss gives a small lot size. If even the minimum lot size exceeds the risk per trade, that stop-loss distance cannot be used with that balance.

• A: 100,000 JPY, 2% (2,000 JPY), 20 pips: 2,000 ÷ (20 × 1,000) = 0.1 lot
• B: 300,000 JPY, 1% (3,000 JPY), 30 pips: 3,000 ÷ (30 × 1,000) = 0.1 lot
• C: 50,000 JPY, 2% (1,000 JPY), 50 pips: 1,000 ÷ (50 × 1,000) = 0.02 lot

Margin level guideline and how it relates to stop-out

Margin level is equity divided by required margin. A margin call is a warning level when the margin level falls. If it drops below the stop-out level (the level at which positions are force-closed), positions are closed.

No single margin level guideline applies to everyone. First find the stop-out level of your own account, then calculate how many pips away it is.

Margin call and stop-out levels of listed brokers (data confirmed on this site; see each broker page for the check date): HFM: maximum leverage up to 1:2000 (conditions apply; varies by account); margin call 50% (KATANA 20%); stop out 20% (KATANA 0%). Monaxa: maximum leverage up to 1:2000 (conditions apply); official wording is 50% for stop out; stop out 20%. AXIORY: maximum leverage up to 1:2000 (conditions apply; Max account, other accounts 1:1000); margin call 50% (Max account 30%); stop out 20% (Max account 0%).

Maximum leverage and levels depend on account type, equity and instrument, so check each broker's trading conditions before opening an account.

Using the conditions of Example A (USD/JPY at 150 JPY, leverage 1,000 times, balance 100,000 JPY), compare two lot sizes. The stop-out level is assumed to be 20%. All figures are hypothetical and exclude spread. 0.1 lot: required margin 1,500 JPY, starting margin level about 6,667%, adverse move to reach stop-out about 997 pips. 1 lot: required margin 15,000 JPY, starting margin level about 667%, adverse move to reach stop-out about 97 pips.

Key point: a high margin level can still mean a short distance. At 1 lot, the starting margin level of about 667% looks high, yet stop-out is only about 97 pips away. Check the distance in pips, not just the margin level figure.

• HFM: margin call 50% (KATANA 20%), stop out 20% (KATANA 0%)
• Monaxa: official wording 50% for stop out; stop out 20%
• AXIORY: margin call 50% (Max account 30%), stop out 20% (Max account 0%)
• 0.1 lot: margin 1,500 JPY, level about 6,667%, about 997 pips to stop-out
• 1 lot: margin 15,000 JPY, level about 667%, about 97 pips to stop-out

High-leverage accounts and bonus credit: money management still follows your balance

Higher maximum leverage makes the required margin smaller. The profit or loss per pip stays the same whatever the leverage.

A smaller required margin lets you hold a larger lot size with the same balance. A larger lot size increases losses by the same proportion, so the upper limit should be set from your balance.

Some accounts lower the maximum leverage that applies according to account funds or position size. If it differs from what you expect, the required margin rises, so check the trading conditions page.

For the basics of leverage and stop-out, see the guide on leverage and stop-out on this site. For how stop-out is calculated, see the column on stop-out calculation on this site.

Bonus credit: a bonus may be reflected in the account as credit. Whether credit counts as margin differs by broker and account. If it counts, the margin level shows higher than with your own funds alone. If it does not, required margin is covered by your own funds only. Some terms also remove the credit on withdrawal or on transfers between accounts.

If you set your risk per trade from your own funds balance, credit treatment does not affect it. Check the individual conditions in each bonus's terms. For withdrawal rules and expiry conditions, see the column on bonus withdrawal rules on this site.

• Example A (0.1 lot, 20 pips): the loss is 2,000 JPY at 100 times or 1,000 times leverage
• Required margin: 15,000 JPY at 100 times, 1,500 JPY at 1,000 times (hypothetical figures, 150 JPY)
• Effective leverage = total position value ÷ equity. Example A: 1,500,000 JPY ÷ 100,000 JPY = 15 times
• If credit counts as margin: the margin level shows higher than with your own funds alone
• If credit does not count: required margin is covered by your own funds
• Credit may disappear on withdrawal or transfers between accounts under some terms

Examples to avoid, and 5 checks before you place an order

This is not about whether a method is good or bad. It is about avoiding a state in which the loss amount is not set in advance. The following are cited as situations where money management tends to break down.

Note: forex can cost you your capital. Forex is leveraged trading, and you may lose part or all of the funds you invest. This guide explains calculation methods. It does not recommend trade size or stop-loss distance.

If you hold several positions, required margin and the swing in losses add up. Check whether the total stays within your risk per trade. For the types of risk in forex, see the guide on forex risk on this site.

• No stop-loss distance: you cannot work back to a lot size, and the loss is not fixed
• Averaging down (adding to a losing position): total lots grow, so required margin and the swing in losses grow too
• Depositing living funds: a loss will unavoidably affect daily life
• Raising lot size to win back losses: the risk-per-trade calculation breaks down
• Opening positions up to the edge of required margin: a small adverse move cuts the margin level sharply
• Before ordering: can you state your risk per trade as an amount, not a percentage?
• Before ordering: is the stop-loss position set, with a stop order or similar ready to place?
• Before ordering: does the calculated lot size work against the minimum lot size?
• Before ordering: have you checked the required margin and the distance to stop-out?
• Before ordering: have you looked at the total of other positions held at the same time?

Frequently asked questions

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