Lot size vs Stop distance.
- Fixed Risk: Deciding exactly how many dollars you are willing to lose.
- Variable Lots: Your lot size must change depending on how wide your stop loss is.
- Pip Value: Understanding that $10/pip on Gold is different from $10/pip on EURUSD.
Why 0.5% - 1% is the gold standard.
Prop firm trading is a marathon, not a sprint. Risking 1% per trade means you need a 100-trade losing streak to blow the account equity (though daily limits are tighter).
Risking 5% or 10% might feel fast, but it only takes a few losses to put you in a deep 'drawdown hole' that is psychologically difficult to recover from.
Calculating the 3% daily floor.
At MixFunded, we have a 3% daily drawdown limit. This is a hard stop for the day. If you start a $100,000 account, your daily floor is $97,000.
Effective position sizing means you never take a trade that, if lost, would put you at that $97,000 mark in one go. You want to give yourself at least 3-5 'attempts' per day.
Adjusting for volatility.
When markets are highly volatile (like during news), your stop loss usually needs to be wider to avoid being 'noised out.' If your stop is wider, your lot size *must* be smaller to keep the total risk consistent.
Consistency in risk (the dollar amount) is more important than consistency in lot size. Never 'guess' your position size; always use the formula.