Ask a new trader what a point is worth on the Nasdaq and most will guess. Ask a professional and they will tell you the exact dollar figure without pausing, because not knowing it means every stop loss and every position size is a guess dressed up as a plan. The gap between those two answers is the entire subject here.
Every instrument has a contract specification, a fixed rule for what one unit of price movement is worth in real dollars. Learn it once per instrument and sizing becomes arithmetic instead of a feeling.
What a contract spec actually tells you
A contract or lot size defines two things: the size of one standard unit, and the dollar value of one point, pip or tick of movement on that unit. A standard forex lot is 100,000 units of the base currency, and on most USD-quoted pairs one pip is worth roughly $10 per standard lot, though it varies slightly by pair. A standard gold lot is typically 100 troy ounces, so a $1.00 move in the gold price is worth $100 per standard lot. Index contracts vary by market: a standard Nasdaq contract might be worth $20 per point, while an S&P 500 contract might be worth $50 per point, depending on the exact contract offered. None of these numbers are guesswork; they are fixed by the contract and available on any platform's instrument specification page.
Turning the spec into a position size
Position sizing always runs the same formula regardless of instrument: risk budget divided by stop distance times value per point. On a $10,000 account risking 1 percent, the budget is $100. Work through the numbers below and the pattern becomes obvious fast.
- EURUSD, 20 pip stop, $10 per pip per standard lot: $100 divided by (20 times $10) equals 0.5 lots.
- Gold, $5.00 stop, $100 per dollar per standard lot: $100 divided by (5 times $100) equals 0.20 lots.
- Nasdaq, 25 point stop, $20 per point per contract: $100 divided by (25 times $20) equals 0.2 contracts.
- WTI oil, $0.60 stop, $1,000 per dollar per standard contract: $100 divided by (0.6 times $1,000) equals 0.17 contracts.
Why the same stop distance means different risk
A 20 point stop means almost nothing on its own, because 20 points of movement is worth wildly different amounts depending on the instrument attached to it. Twenty points on an instrument worth $5 per point per contract is a modest risk. Twenty points on an instrument worth $50 per point per contract is ten times the dollar risk for the identical looking stop distance. Traders who move between instruments without recalculating value per point are the ones most likely to blow through their intended 1 percent risk without ever changing their position size, simply because they assumed the number of points was the risk.
Where to find the real numbers
Every broker publishes contract specifications for each instrument, usually a single page listing contract size, tick or point value, and minimum increment. It takes ten minutes to build a small reference table for the handful of instruments you actually trade: pip or point value per standard lot or contract, and the smallest size your platform allows. That table, checked once and kept in view, is what turns the 1 percent rule from a nice idea into an exact number every time a setup appears, with no mental math required under pressure.