Futures contract risk: tick value, stop distance and position size

Start with the contract specification

A futures price move is not itself a cash risk figure. For a given contract, the exchange specifies a minimum tick size and the value of that tick. These specifications vary across contracts and may change, so check the current contract information before using an example for a real trade.

• Write down the contract symbol and expiry.
• Find its tick size and monetary tick value.
• Measure the proposed stop in ticks, not only chart points.

Work from a risk budget, not a desired contract count

The basic estimate is the number of contracts multiplied by the stop distance in ticks multiplied by the value per tick. For illustration only: if a hypothetical contract has a £1 tick value, a stop of 12 ticks and two contracts, the initial stop-based estimate is £24. Brokerage fees, slippage and gaps can make the actual loss greater. This is not a promise that a stop executes at its chosen price.

• Risk estimate = contracts × stop ticks × tick value.
• Add expected fees and a sensible execution allowance.
• Check that price gaps or fast markets cannot breach the risk limit you can tolerate.

Understand the funded-account constraint

A prop evaluation can have both a maximum daily loss and a trailing or static drawdown limit. Those are different constraints from personal stop placement. Check whether open profit and open losses affect the published drawdown calculation before deciding whether the account suits a strategy.

• Compare the exact rule for each account tier.
• Check intraday versus end-of-day drawdown calculations.
• Compare a firm’s published platform and data access before paying.

Where to compare next

TradeOffr brings futures firm listings and verified product information together for research. Provider rules must be checked again against the official source and the final contract terms.