Almost every argument about gold risk comes down to two numbers that most people never calculate: what one pip is worth, and how many ounces they actually control. Both are arithmetic, not opinion. Get them right and position sizing stops being guesswork.
XAU/USD is quoted in US dollars per troy ounce, normally to two decimal places — 2,412.35, for example. The last of those decimals is the pip: one pip is a move of 0.01 dollars per ounce. A move from 2,412.35 to 2,413.35 is 100 pips, or one dollar.
That definition is a convention rather than a law of nature. Some feeds show three decimals, in which case the third digit is usually called a point and ten points make a pip. If you read a broker's contract specification and the numbers do not match the ones below, trust the specification — it is the document that decides what you actually pay.
Because gold is quoted in dollars, the value of a pip in dollars is just the number of ounces you hold multiplied by 0.01. There is no exchange-rate conversion to worry about when your account is denominated in USD.
| Position | Ounces | Per pip ($0.01) | Per $1.00 move |
|---|---|---|---|
| 1.00 lot | 100 | $1.00 | $100 |
| 0.50 lot | 50 | $0.50 | $50 |
| 0.10 lot | 10 | $0.10 | $10 |
| 0.01 lot | 1 | $0.01 | $1 |
A lot is nothing more than a bundle of ounces that the venue agrees to treat as one unit. The standard bundle is 100 troy ounces, with mini and micro versions at a tenth and a hundredth of that. The naming is borrowed from currency pairs, but the arithmetic is simpler: gold lots divide cleanly by ten.
Gold routinely travels fifteen to thirty dollars inside a single day, and considerably more around major data. On a standard lot that is a 1,500 to 3,000 dollar swing; on a micro lot it is fifteen to thirty dollars. The market did not change — only the bundle did. That is the whole reason lot size matters.
Suppose you buy 0.20 lots at 2,405.60 and close at 2,418.10. The position is 20 ounces. The price moved 12.50 dollars, or 1,250 pips, in your favour.
Now run the same trade against you: a stop twenty dollars lower costs 20 × 20 = 400 dollars on twenty ounces. That single number — the loss at the stop, not the lot size on its own — is what a position size decision should be based on. The position size calculator does the division for you: pick a risk budget, enter the stop distance, and it returns the largest lot size that keeps the loss inside the budget.
Spot gold is traded on margin, which means you post a fraction of the metal's value and the venue covers the rest. The notional value of the position is the price multiplied by the ounces; the margin is that notional divided by the leverage ratio.
At 2,400 dollars an ounce, one standard lot is 240,000 dollars of metal. The table below shows what that costs to hold at common leverage settings.
| Leverage | Margin required | As % of notional |
|---|---|---|
| 1:20 | $12,000 | 5.00% |
| 1:50 | $4,800 | 2.00% |
| 1:100 | $2,400 | 1.00% |
| 1:500 | $480 | 0.20% |
Higher leverage does not increase your risk per dollar of price movement — a one dollar move still costs a hundred dollars per lot. What it does is shrink the cushion between your equity and the point where the venue closes the position. At 1:500 a five dollar adverse move on one lot wipes out 500 dollars of a 480 dollar margin; at 1:20 the same move consumes a fifth of the deposit. The trade is identical; only the survivability differs. If your account uses a different ratio, substitute it in the formula above rather than assuming one of these rows applies.
None of this is exotic. It is multiplication and one division, done before the order rather than after it. The pip and profit calculator handles both directions — price move to pips, and pips to money — and the guide to what XAU/USD actually represents covers the quote convention behind these figures.
One pip in XAU/USD is a move of 0.01 US dollars per troy ounce. On a standard lot of 100 ounces that is 1.00 US dollar per pip, on a mini lot of 10 ounces it is 0.10, and on a micro lot of 1 ounce it is 0.01. The pip value is simply the ounces you hold multiplied by 0.01.
In the convention used by most spot gold and CFD brokers, one standard lot is 100 troy ounces, a mini lot is 10 ounces and a micro lot is 1 ounce. Some venues quote gold in grams or in 1 kilogram contracts, so always check the contract specification before sizing a trade.
Margin is the notional value divided by the leverage. One lot at 2,400 dollars per ounce is 240,000 dollars of metal. At 1:100 leverage that requires 2,400 dollars, at 1:20 it requires 12,000 dollars. Leverage changes the deposit, not the risk: the loss on a given price move stays the same either way.
Trading on the spot gold price carries risk of loss. This page is educational and is not investment advice.