A stop loss decides where a trade exits. Position sizing decides something different and just as important: how much of your account is actually on the line before that stop loss is even hit. Two traders can use the identical entry rule and identical stop loss placement, and still take wildly different amounts of risk, purely because of lot size.
The mistake: a fixed lot size
Always trading 0.1 lots, regardless of the setup, is the most common way traders unknowingly take inconsistent risk. A 15-pip stop and a 60-pip stop at the same lot size risk very different dollar amounts - the lot size didn't adjust to the situation, so neither did the risk.
A steadier approach: risk a fixed percent of your account
Instead of fixing the lot size, fix the risk - commonly 1-2% of account balance per trade - and let the lot size be whatever number makes that percentage true, given that specific trade's stop loss distance. The math behind it is simple:
Lot size = (Account balance × Risk %) ÷ (Stop loss distance in pips × Value per pip)
The result: a trade with a tight stop gets a larger lot size, a trade with a wide stop gets a smaller one - but the actual amount of money at risk stays consistent every time.
A worked example
Account balance: $2,000. Risk per trade: 1% ($20). Stop loss distance: 25 pips. On a pair where 1 pip ≈ $10 per standard lot, that's $250 per lot per pip-equivalent risk unit - so the position works out to roughly 0.08 lots, sized specifically so a full stop-out costs exactly the $20 you decided on in advance, not whatever the market happened to hand you.
Why this matters more than people expect
Risking a consistent 1-2% means a losing streak of even 5-6 trades in a row - which happens to every strategy eventually - costs a manageable, planned-for slice of the account, not a crisis. Risking a careless 10% per trade turns the same losing streak into a wipeout. The entry signal gets most of a trader's attention; position sizing is what actually determines whether a string of bad luck is survivable.