Position size, from points to dollars

Position size is how many contracts you trade. It is the link between the stop you chose and the dollars you are willing to lose. Get it right, and a loss costs what you planned. Get it wrong, and a normal stop can do real damage.

The good news is that the math is short. You need three numbers: your maximum dollar risk, your stop in points, and the dollar value of one point.

The formula

Contracts = maximum dollar risk ÷ (stop in points × dollars per point)

Always round down. If the answer is 3.3, you trade 3 contracts. Rounding up means risking more than you planned on every trade.

For the Nasdaq-100 contracts, the point values are fixed by the exchange. NQ is $20 per point, and MNQ is $2 per point. That means 10 MNQ contracts equal 1 NQ in value. You can check these in the CME contract specs or in Ticks, points and dollars.

Worked examples

Example 1, MNQ. Your maximum risk is $100, and your stop is 15 points. One MNQ contract risks 15 × $2 = $30. Then $100 ÷ $30 = 3.33, so you round down to 3 contracts. Your real risk is $90 before costs.

Example 2, same trade on NQ. One NQ contract on a 15-point stop risks 15 × $20 = $300. That is three times your $100 limit. You can't trade even one NQ on this plan, so MNQ is the only fit.

Example 3, a larger account. Your maximum risk is $400, and your stop is 18 points. On MNQ, one contract risks $36, and $400 ÷ $36 = 11.1, so 11 contracts risking $396. On NQ, one contract risks $360, and $400 ÷ $360 = 1.1, so 1 contract risking $360. Both stay under the limit. MNQ just lets you get closer to it.

When the stop is too wide

Sometimes the stop your setup needs is wider than your risk allows. Say your limit is $100, and the structure stop is 60 points away. One MNQ contract would risk 60 × $2 = $120. The formula gives 0.83, which rounds down to zero.

That zero is an answer. You have two honest choices. You can skip the trade, or you can trade a smaller product if one exists. What you should not do is tighten the stop to a random spot just to fit the size. That changes the setup, and the record stops measuring what you think it measures.

This is one big reason micro contracts are useful for newer traders. Moving from NQ to MNQ cuts the risk per point to one tenth. It lets you follow your stop rule on an account that could never afford NQ on the same stop.

Keep in mind that size does not change the odds. Most people who day trade lose money, and a well-sized losing trade is still a loss. Sizing just makes sure each loss is one you can afford and planned for.

Use the calculator

You don't need to do this in your head mid-session. Use the point value calculator to check dollar risk for any stop size, then round down. Many traders write a small table for their usual stop sizes before the session starts.

The takeaway

Contracts equal your maximum dollar risk divided by your stop in points times the dollar value of a point. Round down every time. If the answer is zero, skip the trade or use a micro contract, but never shrink the stop just to make the size fit.

Do this today

• Work out your position size for your usual stop on MNQ, and round down.
• Make a small table of stop sizes and contract counts for your risk limit.
• Check your numbers with the point value calculator.
• Write a rule for what you do when the formula gives zero contracts.

Check yourself

Answer each one in your head, then open it to check.