What is a lot in forex and how do you calculate the lot size? (2024)

What is a lot in forex trading?

A lot in forex trading is a unit of measurement that standardises trade size. The change in the value of one currency compared to another is measured in pips, which are the fourth decimal place and therefore very tiny measures. This means trading a single unit isn’t viable, so lots exist to enable people to trade these small movements in large batches.

The value of a lot is set by an exchange or a similar market regulator, which ensures everyone trades a set amount and knows how much of an asset they are trading when they open a position.

Lots are subdivided into four sizes – standard, mini, micro and nano – to give traders more control over the amount of exposure they have.

Understanding lots in forex with boxes of chocolates

Let’s say that a company sold boxes of chocolates in two sizes: 12 and 24 chocolates. These are standard sizes and ones consumers have come to expect. They don’t often expect to buy just one chocolate out of the box.

It’s the same with forex currency pairs. You can’t just buy one unit of currency; instead, you buy a lot. Lots come in standard sizes that are universally recognised. For example, you could buy 100,000 lots of base currency GBP for the currency pair GBP/USD. That’s a standard lot. Alternatively, you could buy a micro lot of 1000 GBP.

Forex lot sizes explained

So, how much is one lot in forex? It depends on whether you’re trading a standard, mini, micro, or nano lot. Forex trades are divided into these four standardised units of measurement to help account for small changes in the value of a currency.

The following examples all relate to the currency pair EURUSD, which compares the euro (the base currency) against the dollar (the quote currency). For context, if you buy EUR/USD, you’re speculating that the euro is going to strengthen against the dollar. If the quote price is currently $1.3000, that means you can exchange €1 for $1.3000. To put it the other way around, you need $1.3000 to buy €1.

What is a standard lot in forex?

A standard lot in forex is equal to 100,000 currency units. It’s the standard unit size for traders, whether they’re independent or institutional.

Example:

If the EURUSD exchange rate was $1.3000, one standard lot of the base currency (EUR) would be 130,000 units. This means, at the current price, you’d need 130,000 units of the quote currency (USD) to buy 100,000 units of EUR.

What is a mini lot in forex?

A mini forex lot is one-tenth the size of a standard lot. That means a mini lot in forex is worth 10,000 currency units. The size of a mini lot means the profit and loss effect is lower than a standard lot.

Example:

If the EURUSD exchange rate was $1.3000, one mini lot of the base currency (EUR) would be 13,000 units. This means, at the current price, you’d need 13,000 units of the quote currency (USD) to buy 10,000 units of EUR.

What is a micro lot in forex?

A micro forex lot is one-tenth the size of a mini lot. That means it’s worth 1000 units of currency. Pip movements result in a cash swing of 1 currency unit, eg €1 if you were trading EUR. Micro lots also require less leverage, so a swing won’t have as much of a financial impact as with larger lot sizes.

Example:

If the EURUSD exchange rate was $1.3000, one micro lot of the base currency (EUR) would be 1300 units. This means, at the current price, you’d need 1300 units of the quote currency (USD) to buy 1000 units of EUR.

What is a nano lot in forex?

A nano forex lot is one-tenth the size of a micro lot. It’s equal to 100 units of currency. A one-pip movement with a micro lot is equal to a price change of 0.01 units of the base currency you’re trading, eg €0.01 if you’re trading EUR.

Example:

If the EURUSD exchange rate was $1.3000, one nano lot of the base currency (EUR) would be 130 units. This means, at the current price, you’d need 130 units of the quote currency (USD) to buy 100 units of EUR.

You can find out more about how to buy currency pairs in our guide to forex trading.

How do you calculate the lot size when trading forex?

You won’t normally need to calculate the lot size yourself, as your trading platform should tell you what you need to know. It should be clear when you’re placing a trade what options are available – standard, mini, micro, and nano – and which lot size you’re using. You can calculate the overall size of your position by the size of a lot and the number of lots you’ve bought.

With IG, you can trade standard or micro lots using CFDs. Our platform allows you to toggle between the two before you execute the order.

How to choose lot size in forex

To choose your lot size, think about the risk you want to take. The greater the lot size, the more money you’ll need to put down or leverage you’ll need to use – and the greater each pip movement will be magnified.

A one-pip movement is worth the following monetary amounts for each lot sizes, assuming you’re trading EURUSD:

  • A standard lot = $10
  • A mini lot = $1
  • A micro lot = $0.10
  • A nano lot = $0.01

Remember the currency value will depend on the base currency within the currency pair you’re trading. As you can see, the smaller the lot, the less a one-pip movement costs. In turn, that means you can have a smaller outlay by trading smaller lots.

How can I start trading forex?

You can trade forex online with us. Before you start, you might want to read our guide to forex and how to trade currency pairs. Once you’re comfortable with the basics and how lots in forex work, you can either get started with live trading straight away or create a free demo account to hone your skills.

Plus, with us you’ll be able to take advantage of forex price movements over the weekend with our Weekend GBP/USD, Weekend EUR/USD and Weekend USD/JPY offerings – which some other providers might not offer.

To create an account and trade forex at IG, follow the steps below:

How to trade forex

  1. Create or log in to your trading account
  2. Find the pair you want to take a position on
  3. Decide whether to go long to buy or short to sell
  4. Confirm your deal size
  5. Open and monitor your position

When you trade with us, you’ll use CFDs to go long or short on a currency pair’s price. Going long means that you’re speculating that the pair will increase in value, meaning that the quote is weakening against the base. Going short means that you’re speculating that the pair will decrease in value, meaning that the quote is strengthening against the base.

One main advantage of using CFDs to trade forex is leverage. This enables you to open a position by paying a small percentage of the full value upfront – but bear in mind your exposure will be based on the full value of the trade.

Forex lots summed up

To trade forex effectively, you need to understand lots. Here’s a reminder of what lots in forex are and why they are important:

  • Forex lots are units of measurement. They determine how many units of a currency you’re buying
  • You can buy four types of lots in forex: standard, mini, micro, and nano
  • Your position size is determined by the lot size, and the number or lots you buy or sell
What is a lot in forex and how do you calculate the lot size? (2024)

FAQs

What is a lot in forex and how do you calculate the lot size? ›

The standard size for a lot is 100,000 units of currency, and now, there are also mini, micro, and nano lot sizes that are 10,000, 1,000, and 100 units. Some brokers show quantity in “lots”, while other brokers show the actual currency units.

How to calculate the lot size in forex? ›

A standard lot in forex is the equivalent of 100,000 units of the base currency. A mini lot is a unit measurement representing 10,000 units and a micro lot refers to a unit measurement that is 1,000 units of the base currency.

How much is 0.01 lot size in dollars? ›

This lot size accounts for 1,000 base currency units in every forex trade, determining the amount of a particular currency. Suppose you're trading the USDJPY (U.S. Dollar-Japanese Yen) currency pair, and the base currency is the USD. In that case, a 0.01 lot is equivalent to 1,000 U.S. dollars.

What is a lot size? ›

What is Lot Size. Definition: Lot size refers to the quantity of an item ordered for delivery on a specific date or manufactured in a single production run. In other words, lot size basically refers to the total quantity of a product ordered for manufacturing.

What does 1.00 lot size mean? ›

Comparing Lot Sizes

Standard Lot (1.00): Represents 100,000 units of the base currency. For example, trading one standard lot of EUR/USD means trading 100,000 euros. Mini Lot (0.10): Represents 10,000 units of the base currency. Trading 0.10 lots of EUR/USD means trading 10,000 euros.

How big is 1 lot in forex? ›

A standard lot in forex is equal to 100,000 currency units. It's the standard unit size for traders, whether they're independent or institutional. Example: If the EURUSD exchange rate was $1.3000, one standard lot of the base currency (EUR) would be 130,000 units.

How do you find your lot size? ›

You can also measure the property yourself and calculate out the size by multiplying the length by the width, the total is the square footage of the property.

Is $100 enough for forex? ›

In conclusion, starting forex trading with just $100 is possible, but it requires careful planning and risk management. You need to choose the right broker and account type that fits your budget and trading style. Micro accounts are a good choice for beginners with a low budget.

What lot size is $10? ›

The larger the lot size, the more money you must put down and the bigger the potential return or loss. In most cases, a one-pip movement is worth the following monetary amounts, barring a few currency pair exceptions: A standard lot = $10.

What is the lot size for $100 account? ›

When you trade forex with $100, it's recommended to open trades of no more than 0.01-0.05 lots so that risks should not exceed 5% of the deposit amount. To trade forex with $100, you will need the maximum leverage to lower the margin amount blocked by the broker.

How much is 1 lot in USD? ›

1 lot is 54 USD. Example 2. The contract size for the EURUSD Forex pair is 100,000; the price is 1.23456. Lot value = 1.23456 * 100,000 = $ 123,456.

Can I trade gold with $10? ›

While it's technically possible to trade gold with $10, it's not advisable. Such a small amount would severely limit your trading options and expose you to excessive risk.

Does lot size affect price? ›

Lot size rules matter as well. If everything in the neighborhood is at least one acre in size, then a lot that is an acre and a half might not be that much more appealing. However, if some lots are one acre while others are five acres, then the larger spaces will likely bring substantially higher prices.

How do I calculate my lot size? ›

Alternatively, if you know the dimensions of your property you can simply multiply the length by the width to find the total area.

How much money do you need to trade a 1.00 lot size? ›

To know the size of a lot, you should understand that one standard lot equals 100 000 base or account currency units. Alongside a standard lot, there are two more types – mini and micro. A mini lot equals 10 000 units when micro – 1,000 units.

How to calculate maximum lot size forex? ›

To calculate the max number of lots you can open based on the leverage of the symbol, you will use this calculation: (Account simulated equity x Leverage = Available Capital), then (Available Capital / Contract Size = Max lots).

How do you calculate lot size area? ›

To calculate the square footage of any area, all you need to do is multiply the length and the width of the area (how tall x how wide).

What lot size is good for $100 forex? ›

When you trade forex with $100, it's recommended to open trades of no more than 0.01-0.05 lots so that risks should not exceed 5% of the deposit amount. To trade forex with $100, you will need the maximum leverage to lower the margin amount blocked by the broker.

How to calculate lot value? ›

Lot value is calculated by taking an expected home sale price and subtracting away the soft costs, hard costs, financing costs, sellling costs and the builders required profit.

How much is 0.10 lot size? ›

10,000 Units = 0.10 Lot. 1,000 Units = 0.01 Lot. Below 1,000 Units = 0.001 Lot.

References

Top Articles
Latest Posts
Article information

Author: Twana Towne Ret

Last Updated:

Views: 5847

Rating: 4.3 / 5 (64 voted)

Reviews: 87% of readers found this page helpful

Author information

Name: Twana Towne Ret

Birthday: 1994-03-19

Address: Apt. 990 97439 Corwin Motorway, Port Eliseoburgh, NM 99144-2618

Phone: +5958753152963

Job: National Specialist

Hobby: Kayaking, Photography, Skydiving, Embroidery, Leather crafting, Orienteering, Cooking

Introduction: My name is Twana Towne Ret, I am a famous, talented, joyous, perfect, powerful, inquisitive, lovely person who loves writing and wants to share my knowledge and understanding with you.