Every instrument a broker offers has a specification page, reachable from the platform in two clicks, and almost nobody opens it. It states the contract size, the minimum price increment, the value of that increment, the margin requirement, the trading hours and the financing treatment. Position sizing is arithmetic on those numbers, and doing it without them is guesswork.
The numbers to read first
- Contract size: how many units one lot represents.
- Tick or point size: the smallest price increment the instrument moves in.
- Tick value: what that increment is worth per lot, in the account currency.
- Margin requirement: the percentage of notional the position ties up.
Contract size
In forex, one standard lot is 100,000 units of the base currency, a mini lot is 10,000 and a micro lot is 1,000. Those conventions are near-universal, which is why forex traders rarely think about contract size at all.
Outside forex there is no convention. An index CFD might be one unit per index point, or ten. A commodity CFD might be 100 barrels or 1,000. A share CFD is usually one share per contract, but not always. Two brokers offering the same index can define the contract differently, so a position of identical size in lots has different exposure at each.
This is the most common source of accidental oversizing. A trader who moves brokers, keeps their usual lot size and finds the position behaving ten times more violently has met a different contract definition, not a different market.
Tick size and tick value
Tick size is the smallest increment the price moves in; tick value is what that increment is worth. In forex, a pip on a five-decimal major is the fourth decimal place, worth ten units of the quote currency per standard lot. If the quote currency is not your account currency, the value in your account currency moves with the exchange rate.
This is worth stating explicitly because it is invisible until it matters. A euro-denominated account trading a pair quoted in yen has a pip value that changes with EUR/JPY, so the same stop distance represents a slightly different risk from week to week. For most traders the variation is small enough to ignore; for those sizing precisely it is not.
Compute risk per trade from the specification, not from habit
Risk equals stop distance in ticks, times tick value, times lots. All three numbers come from the specification page and your order ticket. Any position sizing method that skips this is estimating something it could compute exactly.
Margin requirement
The specification states margin as a percentage of notional or as a leverage ratio, which are the same information. Five percent margin is 20:1 leverage; 3.33 percent is 30:1. What the specification adds beyond the headline is that requirements vary by instrument class, and that many brokers raise them under defined conditions.
Those conditions matter. Margin requirements are commonly increased before major scheduled events, ahead of weekends on certain instruments, and on positions above a size threshold — tiered margin, where the first tranche of a large position is margined at the standard rate and further tranches at higher ones. A trader who sizes to the standard rate and then meets the tiered rate finds the position requires more margin than expected at exactly the moment of opening.
The rest of the table
Trading hours are stated per instrument and are not the same as market hours. A broker may quote an index CFD outside the underlying exchange's session, with wider spreads and thinner liquidity, and the specification says when.
The financing section states whether the instrument carries a daily swap, the basis it is calculated on, and which day the triple charge falls. For a futures-based instrument it states the expiry and roll policy instead.
Execution details — the model, minimum and maximum position sizes, the minimum distance a stop must be placed from the current price — round out the table. That last one, stop distance, catches scalpers on instruments where the broker requires stops to sit some way from the market.
A specification check before trading a new instrument
- Open the instrument's specification in the platform, not the marketing page.
- Note the contract size and confirm what one lot actually represents.
- Note the tick size and tick value in your account currency.
- Multiply a typical stop distance by tick value to get risk per lot, and size from there.
- Check the margin percentage, including any tiering above a size threshold.
- Read the trading hours and the financing or expiry treatment.
- Confirm the minimum stop distance is compatible with your method.
Why this is the highest-value ten minutes
Most position sizing errors are not judgement errors. They are arithmetic performed on assumed numbers — a contract size carried over from another broker, a pip value assumed rather than checked, a margin requirement that turned out to be tiered. Each is eliminated by reading a table that takes a few minutes per instrument and never needs rereading unless the broker changes it.
Traders who do this for every instrument before trading it are rarely surprised by the size of a loss. Traders who do not are periodically surprised by all of them at once.
Common questions
Why is my index position moving more than expected?
Almost always a contract size difference. Index CFD contract definitions vary between brokers, so the same number of lots represents different exposure. Check the specification rather than assuming the previous broker's convention.
What is the difference between a pip and a tick?
A pip is a forex convention, normally the fourth decimal place on a five-decimal quote. A tick is the general term for the smallest price increment of any instrument. On many instruments they are the same thing under different names.
Why did my position need more margin than I calculated?
Possibly tiered margin, where larger positions attract a higher requirement above a threshold, or a temporary increase applied before a scheduled event or a weekend. Both are stated in the specification or in the broker's margin policy.
Does the specification ever change?
Yes. Margin requirements, trading hours and financing terms are revised, usually with notice. It is worth rereading the specification for your main instruments periodically rather than treating it as fixed.
