Fixed lot sizing in gold trading

Fixed lot sizing is the simplest position-sizing model: every trade uses the same volume regardless of the stop distance or account size. It contrasts with fixed-fractional sizing, where the lot size changes so the risk in dollars or percent stays constant.

How it applies to gold trading

Gold stops vary widely: a scalp might need $3, a swing trade $30. With a fixed 0.10 lots, the first risks $30 and the second $300. Results then depend on which trades happen to have wide stops rather than on the quality of the setups, and a few wide-stop losses can dominate a month.

Fixed lots have uses. They make backtests easy to read in raw dollars, they suit very small accounts stuck at the minimum lot, and some traders use them during a learning phase. Many move to fixed-fractional or volatility-based sizing once they trade a range of setups.

Worked example

Example (hypothetical numbers): 0.20 lots on every trade. Trade A has a $5 stop and risks $100; trade B has a $25 stop and risks $500. If both lose, the account is down $600, and B alone accounts for five-sixths of it. With fixed 1% risk on $10,000, each would have risked $100, sized at 0.20 and 0.04 lots respectively.

A common mistake

Calling fixed lots “low risk” because the size is small. Risk is lots times stop distance; a small lot with a wide stop or no stop can still lose a lot.

See also: Position sizing, Risk per trade, Volatility position sizing, Minimum lot.

Frequently asked questions