Lots (in Trading)

What Are Lots (in Forex Trading)?

In Forex trading, "lots" are just a way to measure how much currency you’re buying or selling in a trade. Think of it like buying items in bulk—the "lot" is the size of your order.

How Lots Work

• Standardized Units: A "lot" is a fixed amount of currency, so everyone knows exactly how much is being traded.
• Lot Sizes: There are different sizes, like micro (smallest), mini (medium), and standard (largest). For example, a standard lot equals 100,000 units of currency.
• Risk Control: By choosing the right lot size, you can control how much money you’re putting into a trade and how much risk you’re taking on.

Example

1. Nano Lot:

100 units of the base currency (offered by some brokers, often for beginner traders).

1. Micro Lot:
   A micro lot is the smallest trade size, equal to 1,000 units of the base currency. If you're trading EUR/USD, a micro lot would be 1,000 euros.
   Risk: If the EUR/USD pair moves by 1 pip (a small price movement), the profit or loss for a micro lot would be 0.10 USD.
2. Mini Lot:
   A mini lot is 10,000 units of the base currency. In the EUR/USD pair, this would be 10,000 euros.
   Risk: A 1-pip movement in EUR/USD would result in a profit or loss of 1 USD.
3. Standard Lot:
   A standard lot is the largest size, equal to 100,000 units of the base currency. For EUR/USD, this would be 100,000 euros.
   Risk: A 1-pip move in EUR/USD would result in a profit or loss of 10 USD.

In Short, Lots define the size of your Forex trade and you can choose between nano, micro, mini, and standard lot sizes.