The fixed-fractional formula
Lots = (Account size × Risk percent) / (Stop-loss distance in pips × Pip value per lot). This is the standard model in retail trading and the one used by most successful prop-firm traders. The output is a precise lot size that risks exactly the chosen percentage if the stop hits.
Why fixed-fractional beats fixed-lots
Fixed-lots sizing (always trading the same number of lots regardless of stop distance) means a tight-stop trade risks far less than a wide-stop trade. The expected value per trade becomes inconsistent. Fixed-fractional sizing keeps the dollar risk constant per trade, which makes the math behind your edge work as intended.
Recommended risk percentages
0.5% in the first month of any new account. 1% after at least 30 live trades have confirmed the strategy behaves as backtested. 2% as the absolute ceiling — at 2% per trade, three losers approach FTMO's 5% daily-loss limit, leaving no room for variance.
Common sizing mistakes
Sizing for the win instead of the loss. Sizing the same on different instruments (pip values vary). Adjusting size mid-drawdown out of fear or revenge. Forgetting to add spread to stop-distance. The free position-size calculator on this site handles each of these correctly when given proper inputs.
Related terms
Author
Maximilian Bossow
Independent prop-firm trader. Reached FTMO Platinum tier with verifiable Overall Rewards across multiple funded accounts. Founder of MB Capitals — a coaching system for traders who want to pass prop-firm challenges through structured risk management, not gurus. The proof is on the homepage: every cert, every payout, every receipt of what it took to get there.