Understanding Different Lot Sizes in Forex

What Is Lot Size in Forex?

A lot size in Forex is basically the number of currency units you are willing to buy and sell. It’s important to keep in mind that the size of your lot has a direct impact on and determines the level of risk you’re willing to take.

Let’s assume a shop sells boxes full of apples. Each box contains 12 apples. This box is a standard size and you can’t buy only one apple from the shop.

Currency/forex trading works the same. You can’t buy one currency, you need to buy it in a unit which is called a lot. The standard lot size in forex is 100,000 units of currency. there are also mini, micro, and nano lot sizes

To trade the forex market efficiently, it’s really important to understand the concept of lot size in Forex. 

Different Lot Sizes in Forex Explained

Basically there are 4 types of lot size in forex: Standard, mini, micro, and nano. Let’s understand the lot sizes with examples.

What is a standard lot size in forex?

In Forex trading, a standard lot is equivalent to 100,000 units of the base currency you’re trading. So, you’re buying or selling any currency pair with standard lot 1.0, it means you’re buying or selling 100,000 units of the base currency.

if you buy EURUSD with 1 lot, it means you’ve bought 100,000 EUR.

Note: With a standard lot, each pip equals $10

Example:

Let’s assume, you’ve bought EURUSD at 1.1500 with 1 standard lot. Now the price moved to 1.1800. This means the price moved 30 pips.

Previously we mentioned that in the standard lot, each pip equals $10.

Which means, from the EURUSD trade, you made profit of (30*$10) = $300

What is a mini lot size in forex?

A mini lot in Forex is equivalent to 10,000 units of currency which is one-tenth of the standard lot. So, if you trade with a mini lot, you make less profit and less loss.

Note: With a mini lot, each pip equals $1.

Example:

if you buy EURUSD with 0.10 lot, it means you’ve bought 10,000 EUR.

Let’s assume, you’ve bought EURUSD at 1.1500 with 1 standard lot. Now the price moved to 1.1800. This means the price moved 30 pips.

Previously we mentioned that in the mini lot, each pip equals $1.

Which means, from the EURUSD trade, you made profit of (30*$1) = $30

What is a micro lot in forex?

A micro lot in Forex is equivalent to 1000 units of currency which is one-tenth of a mini lot.

Note: With a micro lot, each pip equals $0.10.

Example:

If you buy EURUSD with 0.01 lot, it means you’ve bought 1000 EUR.

Let’s assume, you’ve bought EURUSD at 1.1500 with 1 micro lot. Now the price moved to 1.1800. This means the price moved 30 pips.

Previously we mentioned that in the mini lot, each pip equals $0.10.

Which means, from the EURUSD trade, you made profit of (30*$0.10) = $3

What is a nano lot in forex?

A nano lot size in Forex is equivalent to 100 units of currency which is one-tenth of a micro lot.

If you’re a beginner trader and want to start currency trading with small investment, then nano lot is just for you. But, before choosing any broker, remember there are only a few brokers who allow you to trade with nano lot.

Note: With a nano lot, each pip equals $0.01.

Example:

if you buy EURUSD with 0.01 lot, it means you’ve bought 100 EUR.

Let’s assume, you’ve bought EURUSD at 1.1500 with 1 nano lot. Now the price moved to 1.1800. This means the price moved 30 pips.

Previously we mentioned that in the nano lot, each pip equals $0.01.

Which means, from the EURUSD trade, you made profit of (30*$0.10) = $.30

Why Does Lot Size Matters in Forex Trading?

As a Forex trader, it’s really important to manage your money properly to become successful.

The lot size reflects how much money you’re willing to risk. The bigger lot size you take, the bigger risk it will be. A small movement in the currency market can affect a trader’s account and it indicates how big that effect is.

Lot Size Calculator:

Based on your risk management strategy, you can calculate how much money you’re willing to risk per trade. The ideal risk management for a Forex trader is 2%/3% of the account balance.

A lot size calculator can help you calculate the lot size for you according to your account balance. All you have to do is to put some data and that’s it.

The data that you need are –

1. Account balance
2. Risk percentage of your account
3. Stop loss (SL)

SureshotFX has a simple lot size calculator which can help you calculate the lot size efficiently. You can check it out here.

KEY TAKEAWAYS:

1. A lot size is the number of currency units you trade.
2. There are 4 types of lot size in forex: Standard, mini, micro, and nano.
3. It reflects how much money you’re willing to risk. The bigger lot size you take, the bigger risk it will be.