Position Sizing with Spread and Commission

Separate price loss from additional costs

A cash risk budget needs to cover the modelled adverse price move and any extra costs you choose to allow for. A position that uses the whole budget on price movement leaves nothing for commission, financing or execution differences.

Keep every component in the account currency before combining them. A fixed cash reserve is a total amount for the proposed trade. A per-lot commission rate grows with position size. They require different arithmetic. Rates and prices in this guide are hypothetical, not a broker quotation or a recommended risk level.

Example one: a fixed cash reserve

Suppose the budget is USD 100, the EUR/USD stop distance is 25 pips and a full lot has a USD 10 pip value. Price loss per lot is 25 × 10 = USD 250. With no costs, the calculation gives 100 ÷ 250 = 0.40 lot.

Reserving a fixed USD 5 leaves USD 95 for the price move. The size becomes 95 ÷ 250 = 0.38 lot. At that size the price-loss estimate is USD 95 and the reserved allowance is USD 5, totalling USD 100.

The reserve is an assumption, not an execution guarantee. If actual costs or slippage exceed it, the realised loss can exceed the budget. Our position-size tool accepts this fixed-reserve model.

Example two: commission charged per lot

Instead assume USD 7 round-turn commission per full lot, with no other reserve. A round turn means opening and closing the position; confirm whether a published fee is per side or already round turn. Here, total modelled loss per lot is 250 + 7 = USD 257.

100 ÷ 257 is approximately 0.389105. With a 0.01-lot increment, round down to 0.38 lot. Price loss is USD 95 and commission is 0.38 × 7 = USD 2.66, making USD 97.66. Rounding up to 0.39 would produce USD 100.23 and exceed the modelled budget.

If a separate USD 5 fixed reserve also applies, 95 ÷ 257 rounds down to 0.36 lot. The result is USD 90 price loss + USD 2.52 commission + USD 5 reserve = USD 97.52. Minimum commissions, tiers and nonlinear charges require the broker's actual fee schedule.

Avoid counting spread twice

When entry and assumed exit use executable ask and bid prices, their difference already includes spread. Add commission and other charges separately; do not add the same spread again. If the distance was measured using mid-prices or only one chart quote, first reconcile it with the sides used for execution.

The fixed-reserve calculator does not interpret a per-lot fee schedule for you. Translate fees into a cash allowance for the proposed size and recheck the final size against that schedule. Use the profit/loss calculator to inspect long and short price outcomes with a total cash-cost assumption.

Document the prices, pip size, conversion direction, contract units and fee convention with the scenario. Keeping assumptions visible makes a calculation reproducible; it does not make a trade suitable or profitable.