One of the most important elements to grasp when attempting to trade the volatile,aggressive market that we all know as the foreign exchange market is risk management but more importantly the calculation of one's risk exposure.Time and time again,i see within my telegram team,upcoming traders who have little or no real understanding on what proper lot size he or she should use which ultimately results in either A) an emotional rollercoaster when in a trade or B) a blown up account (poor money management) we'd like to show you a simple way to calculate ones risk exposure when entering a trade.To start,we will take an example account balance of $5,000 in which the trader would like to risk 2.5% of their account. With this, we must first calculate what 2.5% of $5,000 is which equates to $125.From there, we must understand what the desired stop loss is within this given trade. Let's say the stop loss within this trade equates to 50 pips. From there, we must find out how what lot size will be appropriate to use for our stop loss which will equate to $125 (2.5% risk of the account) First we must understand the pip value of some lot sizes. If we have a 0.01 lot size, the pip value is 1 cent per pip. If we have a 0.10 lot size,the pip value is $1 per pip. If we have a 1.0 lot size,the pip value is $10 per pip. Since the trader is looking to risk 2.5% of their account which equates to $125 with a 50 pip stop loss,then our lot size would equate to 0.25 which would equate to $2.50 per pip in which if we multiply that by 50 pips,that gives us $125 or 2.5% risk exposure of the account. Now one thing we must take into consideration is the potential spread he or she incurs as well as the potential commission the trader might pay on each trade. With this, it may be wise to add an additional couple of pips to his or her stop loss to counter this variables. Understanding ones risk exposure is extremely important as failure to do so results in us traders being classified as gamblers. There are very few things that we can control when entering and exiting the market.However,understanding the amount of risk exposure we will have within our trades is something we can control!