**Step 1: Check Your Net Liquidation (i.e. Capital )**

Once you log in to your broker platform, you can look at your **net liquidation,** which is the amount of capital that you have for trading.

For example, if you open an account and you fund it with $1,000, that is your net liquidation.

**Step 2: Determine Your Risk Per Trade**

Risk refers to the maximum loss you’re willing to take for every trade you put in. This is the maximum you can lose if your stop-loss is hit.

**Remember this: NEVER risk more than 1% to a maximum of 3% of your capital in any single trade.**

If you’re new to trading Forex, my suggestion is to always start with a 1% risk per trade. When you’re confident and experienced enough, you can raise it to 2% and eventually to 3% maximum.

Once you decide on your risk per trade, you must stick with it consistently over a period before you raise it.

**Always be consistent with your risk per trade** because you can never predict the outcome of any single trade. Remember: On a trade-by-trade basis, every trade outcome is random.

**Step 3: Determine Your Forex Position Size for Each Trade**

To help you understand how position sizing works, I’ll show you how to calculate it manually.

Here’s the formula:

Now, what do all these things mean? Let’s look at some examples.

#### Forex Position Sizing Example #1

**Net Liquidation:**Let’s say you start with $10,000 in your account. Net liquidation will be $10,000.**% Risk Per Trade:**Imagine you’ve just started trading, so you risk 1% per trade.**Net Liquidation****x****% Risk Per Trade:**$10,000 multiplied by 1% is $100. This means the maximum you are willing to lose is $100 per trade.**Stop-Loss Distance:**This is the distance from your entry price to your stop-loss price. Say, you buy at 1.2120 and you place the stop-loss at 1.2100.

Now, **your stop-loss placement is always based on candlestick patterns**. So for different trades, your stop-loss will be placed at different distances. (In my Forex trading course, I teach you exactly where to place your stop-loss.)

Depending on the price action, your stop-loss may be 8 pips or 20 pips away. In this case, let’s imagine you’re placing your stop-loss 20 pips away.

**$ Value Per Pip:**This figure depends on the currency pair you’re trading. If you’re trading EUR/USD, this will be $10. Other pairs could be slightly more or less than $10. There are many websites where you can check this value.

This brings us to the equation: ($10,000 x 1%) / (20 x $10) = 0.5 lots

In Forex trading, one standard lot is 100,000 of the base currency. In this example, we’re trading the EUR/USD, so the base currency is in euro.

One lot is 100,000 euro, so 0.5 lot is 50,000 euro, which is the exact amount you should buy to place this trade.

#### Forex Position Sizing Example #2

**Net Liquidation:**Let’s say you funded your account with $10,000.**% Risk Per Trade:**Let’s imagine you’re more experienced now, and you decide to risk 3% of your capital.**Net Liquidation****x****% Risk Per Trade:**$10,000 multiplied by 3% is $300. This is the maximum amount you’re willing to lose in a trade.**Stop-Loss Distance:**This time, your stop-loss is 30 pips away.**$ Value Per Pip:**Say you’re trading EUR/USD again, so the $ value per pip is $10.

The number of lots you should trade = ($10,000 x 3%) / (30 x $10) = 1

Recall that one lot is 100,000 of the base currency, which is euro in this case. So you will buy 100,000 euro.