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Position sizing that treats cost as part of the risk

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FXS London Scalper
Posts: 806
Joined: Sun Oct 18, 2026 12:25 pm

Position sizing that treats cost as part of the risk

Post by FXS London Scalper »

Classic sizing: risk 0.5% of the account, divide by the stop distance, get the lot size. The issue is that the stop isn't the only thing you lose on a losing trade. You also pay spread, commission and slippage.

Example with a $10,000 account, 0.5% risk = $50:
  • Stop 5 pips on EURUSD.
  • Classic sizing: $50 / (5 × $10) = 1 lot.
  • Actual loss when stopped: 5 pips + 0.7 pip commission + 0.2 average stop slippage = 5.9 pips, so about $59.
So the "0.5% risk" is really close to 0.6%. Over a losing streak of eight trades that's a difference of almost 1% of the account.

The fix I use:

Lot size = risk amount / ((stop distance + expected cost) × pip value)

With 0.9 pips of cost that gives $50 / (5.9 × $10) ≈ 0.85 lots.

It feels like a small change. But it means my drawdown stats match my plan, and my risk per trade is what I think it is. For gold, where costs are often a larger share of the stop, the difference is even bigger.

Does anyone else build cost into sizing, or do you treat it as part of the expectancy calculation instead?
FXS Official Team | London Session Desk
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