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Position Sizing for a Prop Challenge: The Exact Math
Position size is the one setting that decides whether a bad streak ends your challenge. Here is how to work it out from the firm’s own loss limits.
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Most failed challenges are not failed by a bad strategy. They are failed by size: a few normal losses at too large a position, and the daily or maximum loss limit is gone. Sizing from the firm’s limits backwards fixes that.
Step 1: decide risk per trade
Start from the tightest limit. On FTMO’s 2-Step, the daily loss limit is 5 per cent and the maximum loss 10 per cent of the starting account. A common rule is to risk no more than 0.5 to 1 per cent of the account per trade, so that five losing trades in a row still leave you inside the daily limit.
| Risk per trade | On $100,000 | Losses in a row to hit a 5% daily limit | Losses in a row to hit 10% maximum loss |
|---|---|---|---|
| 0.25% | $250 | 20 | 40 |
| 0.5% | $500 | 10 | 20 |
| 1% | $1,000 | 5 | 10 |
| 2% | $2,000 | about 3 | 5 |
At 2 per cent a trade, three ordinary losses in a day end a 2-Step account and a streak of five ends any account. At 0.5 per cent you need ten losses in one day.
Step 2: turn risk into lots
Position size in lots = money at risk ÷ (stop loss in pips × pip value per lot). On EUR/USD and other pairs quoted in US dollars, one standard lot is worth about $10 a pip.
On a $100,000 challenge, risking 0.5 per cent means $500. With a 25-pip stop on EUR/USD: $500 ÷ (25 × $10) = 2 lots. With a 40-pip stop the same risk is $500 ÷ (40 × $10) = 1.25 lots. The risk stays fixed; the lot size moves with the stop.
On pairs not quoted in dollars, such as USD/JPY, the pip value changes with the exchange rate, so recalculate it or use a calculator.
Our prop firm calculator and position size calculator do this arithmetic for you.
Step 3: cap total open risk
Firms measure equity, including open trades. Three trades open at 1 per cent risk each is 3 per cent of exposure if all three hit their stops together, which is easy when the trades are correlated, such as EUR/USD and GBP/USD long. Add up the risk of every open position and keep the total well inside the day’s remaining room.
Step 4: shrink after losses
When you are close to a limit, cut size. If you are 3 per cent down on the day against a 5 per cent limit, a full-size loss takes you to 4 per cent and a second one ends the account. Halving size after a loss, or stopping for the day at your own lower limit, keeps one bad session from ending a challenge.
Doubling size to “win back” a loss is the fastest way to fail. The target can wait; FTMO sets no time limit.
Pip values on common instruments
The lot-size formula needs the value of a pip, or point, per lot. These are approximate and depend on the account currency and price:
| Instrument | Value of 1 pip or point per standard lot | Note |
|---|---|---|
| EUR/USD, GBP/USD, AUD/USD | About $10 | Quote currency is USD |
| USD/JPY | About ¥1,000, which varies in USD with the rate | Recalculate as the rate moves |
| Gold (XAU/USD) | $1 move = $100 per 100-ounce lot | Contract sizes vary by firm; check specifications |
| Indices | Varies by contract | Always check the firm’s contract size |
Because contract sizes differ between firms and instruments, use the firm’s own specifications or a calculator rather than assuming.
Sizing for correlated trades
Two trades in correlated markets are close to one trade at double size. If you go long EUR/USD and GBP/USD at 0.5 per cent each, a broad dollar rally can stop both, costing 1 per cent. Treat strongly correlated positions as one when adding up risk, and cap the total.
Adjusting size as a challenge progresses
| Situation | Sizing approach |
|---|---|
| Start of challenge | Your standard risk, such as 0.5% |
| Up 5% or more | Keep the same risk; do not press |
| Down 3% on the day | Halve risk or stop for the day |
| Close to the maximum loss floor | Cut risk sharply until you rebuild room |
| Near the target | Same risk; let the plan finish it |
A trader risking $500 on gold with a $5 stop calculates $500 ÷ ($5 × $100 per lot) = 1 lot. If the firm’s gold contract were 10 ounces instead, the same risk would need 10 lots. Checking the contract size first avoids a tenfold sizing error.
Use our gold lot size calculator and prop firm calculator rather than doing contract maths in your head during a session.
Related guides
Sizing connects directly to the loss limits and to how long a challenge takes.
- The daily loss limit: how it is measured, why equity counts and how to stay inside it.
- Maximum drawdown, explained: static and trailing floors side by side.
- How long passing takes: realistic timelines worked out from your own numbers.
- Mistakes that fail an evaluation: trading, technical and rule-reading errors, with fixes.
A sizing checklist for every trade
- Risk amount: account size × risk percentage.
- Stop distance in pips or points, set from the chart, not from the size you want.
- Pip or point value per lot from the firm’s specifications.
- Lots = risk ÷ (stop × value per lot), rounded down.
- Total open risk, including correlated trades, still inside today’s room.
Rounding down, never up, keeps every trade at or below your planned risk.
Key terms
| Term | Meaning |
|---|---|
| Lot | A standard unit of trade size; 1 lot of EUR/USD is 100,000 euros |
| Pip | The usual smallest price step in a currency pair, 0.0001 for most pairs |
| Risk per trade | The amount lost if the stop is hit, as a share of the account |
| Correlation | How closely two markets move together, which adds their risks up |
Cite this guide
FX Recap, "Position Sizing for a Prop Challenge: The Exact Math", updated 14 October 2026, https://fxrecap.com/prop-trading/position-sizing-for-a-prop-challenge
Free to quote with a link. Journalists: data and comment in our press room.
Frequently asked
How much should I risk per trade on a prop challenge?
Commonly 0.5 to 1 per cent of the account. At 0.5 per cent on a $100,000 account you would need ten losing trades in one day to reach a 5 per cent daily loss limit.
How do I calculate lot size for a prop challenge?
Divide the money you are risking by the stop loss in pips times the pip value per lot. Risking $500 with a 25-pip stop on EUR/USD, at about $10 a pip per standard lot, gives 2 lots.
Do open trades count towards the daily loss limit?
At FTMO, yes: equity, including open trades, must stay above the daily limit. Add up the risk of all open positions, especially correlated ones.
Should I trade bigger to pass faster?
No. Larger size makes a run of normal losses fatal. Most firms, including FTMO, set no time limit, so a slower pass at safe size is the better plan.
How much is a pip worth on gold?
It depends on the contract size. On a 100-ounce lot, a $1 move in gold is worth $100. Contract sizes vary by firm, so check the specifications.
Should I reduce size after a losing day?
Yes. Halving risk after a loss or stopping for the day protects the daily and maximum loss limits while you recover.
Related reading
The team behind this guide
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