As a new trader you will need to have an understanding of Forex lot sizes and how they affect your trading. Learning about Forex lots is not complicated and all the numbers involved are easy to deal with.
Forex Standard Lots
The term ‘lot’ refers to 100,000 units of the base currency for whatever currency pair you are working with. This is known as a Forex standard lot. Although the use of forex leverage allows smaller traders to open relatively large positions, sensible risk management often limits trade sizes to less than 100,000 units. Therefore there are other smaller common lot sizes which are available through most large brokers, these are discussed below.
When trading one standard lot with the USD as the base currency, each pip is worth $10.
Forex Mini Lots
At 1/10th the size of a standard lot, mini Forex lots are made up of 10,000 units of the base currency. Mini accounts are hugely popular with beginning traders. Many larger traders also take advantage of the smaller Forex mini lot sizes as they allow a greater flexibility if you want to build trading positions for specific amounts, rather than just multiples of 100,000.
When trading one mini lot with the USD as the base currency, each pip is worth $1.
Forex Micro Lots
As the smallest option offered by many forex popular brokers, the Forex micro lot contains 1,000 base currency units. Trading with these small amounts offers new traders the considerable benefit of being able to open a micro account with a small amount such as $1000, and still following sound risk management principles without putting large amounts of their capital on the line. Some brokers will place limitations on Forex micro lot trading accounts such as requiring traders to use a broker trading platform, rather than one of the popular alternatives like Meta Trader. Micro lots still are great for getting your feet wet in Forex though.
When trading one micro lot with the USD as the base currency, each pip is worth 10 cents.
|Last modified 17 May 2020 2:22 PM by Mick R.|