What Is Lot In Forex?
- Forex lot represents the overall amount of specific currency that a trader owns
- Standard lot equals 100,000 units
- Mini lot is 10,000 currency units
- Micro lot is 1,000 units
- Nano Lot is 100 currency units
Understanding Forex Lot Sizes – How Do They Work?
Forex lot size explained: Lots are measuring units to determine trade sizes.
Lots are a very important term in the Forex market. They’re basically measurement units to show the size of a trade. There are different types of Forex lot sizes in the foreign exchange market. The size of the lots has a huge impact on the risks that an investor has to face in their future trading. Therefore, novice traders are usually recommended to go for smaller lots as a starting point to better get adjusted to how trading works mostly.
There are four types of lots in the Forex market including the Standard lot, Mini lot, Micro lot, and Nano lot. We will discuss each of them briefly down below.
A standard lot is the most actively used Lot size type in the foreign exchange market. It equals 100,000 units of a specific currency. It means that If you are trading with US Dollar pairs, the overall amount of the standard lot would be 100,000$. Considering the fact that this is a big amount of money, usually, this lot is used in order to open a larger position in the FX market rather than a small one. This is why a standard lot is generally traded by professional traders.
However, most Forex lot size guides don’t mention that not all of the funds should be deposited by the trader. With the use of leverage, the required deposit can be significantly reduced.
A mini lot is another FX lot size that represents 10,000 currency units. This means that while trading with the USD currency pairs, the value of this lot would be 10,000 dollars. A mini lot is a perfect match for investors who do not want to risk too much money and choose to trade with low leverage levels. Another big advantage of the Mini lot is that it is dedicated to not only professionals but beginner traders as well.
Micro Forex lot size is 1,000 units of the specific currency. For people who are not well-funded or just do not want to deposit big amounts to start their trades, micro lots are probably the best option. This is why this Forex lot type is generally actively chosen by novice traders who just take their first steps into the market.
Nano Lot is the smallest lot size among all the alternatives. It equals 100 currency units. If the investor is trading with the USD pairs then it will be worth $100. Considering the fact that this lot is very small in its size, people usually use the Nano lot in order to practice trading in the Forex market and develop some trading strategies for their future trades.
What Did We Learn From This Forex Lot Size Article?
We learned that Forex lots are basically a unit of measurement for a trade size.
There are four types of lots in the Forex market including the Standard lot, Mini lot, Micro lot, and Nano lot.
A standard lot is the most actively used Lot size type that equals 100,000 currency units.
Common Questions on Forex Lot Sizes
What Does 0.01 Lot Size Mean?
0.01 lot size represents a micro lot size that equals 1,000 units of the specific currency. In terms of trading with the USD currency pairs, the Micro lot means that the trader buys or sells $1000. Also, 0.01 lot size means that it will need 10 pips to gain you a profit of $1.
What Lot Size Should I Use For Forex?
It is impossible to say which lot size is the best because it depends on the individual retail traders’ trading goals, preferences, and financial capacities. However, if you are a beginner trader, then probably the best option for you would be Nano or Micro lot because it contains fewer risks. On the other hand, if you are a professional trader then choosing the standard lot size would be the appropriate alternative for you.
What Does Lot Size Mean In Forex?
A lot size is a unit of measurement for a trade’s size. There are four types of lots in the Forex market including the Standard lot, Mini lot, Micro lot, and Nano lot.