How to Calculate Safe Lot Size
(Step-by-Step)
The most important calculation in prop trading — get this right, and you\'ll never violate drawdown rules. Here\'s the exact process.
The Core Formula
Worked Example: FTMO $100K Account
Given:
- • Account Size: $100,000
- • Current Equity: $98,500 (down $1,500)
- • Max Drawdown: 10% ($10,000)
- • Daily Drawdown: 5% ($5,000)
- • Open Trades: 1
- • Stop Loss: 30 pips (EUR/USD, $10/pip)
Calculation:
1. Max Loss = $100,000 × 10% = $10,000
2. Remaining Buffer = $98,500 - ($100,000 - $10,000) = $8,500
3. Daily Limit = $100,000 × 5% = $5,000
4. Effective Buffer = min($8,500, $5,000) = $5,000
5. Risk Per Trade = $5,000 / (1 + 1) = $2,500
6. Safe Lot Size = ($2,500 × 0.6) / (30 × $10) = 5.0 lots
Result: With a 30-pip stop loss and 1 existing open trade, the safe lot size is 5.0 lots. Even if both trades hit stop loss simultaneously, you\'d lose $3,000 — well within your $5,000 daily limit.
Critical Tips
Always recalculate after each trade — your buffer changes
Use a tighter stop loss (20-30 pips) to allow reasonable lot sizes
The 0.6 safety factor is conservative — that's the point
With multiple open trades, your safe lot size drops significantly
Daily drawdown resets each day — use it to your advantage
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