LotsStandardlots- Minilots- Microlots


  • In financial trading, a batch is the standard amount of purchase or sale of a financial instrument.

    An investor can buy a batch of shares of a company and this lot can represent, for example, 100 shares.

    In Forex trading, the lot is equal to 100,000 units of the base currency,i.e. the first currency in the pair. With EURUSD the base currency is Euro, while the US Dollar is base currency in USD/JPY.
    The exact quote for pip varies depending on the negotiated pair of currencies, but it is worth about $10 per pip for a standard lot.

     

    • Standard Lot

    From the point of view of a margined account on the metatrader4 platform, a standard account is presented as 1.0. In order to understand the dollar equivalent, we multiply this by a constant of $100.000.

    In the case of a standard lot of 1pip is equal to $10 US dollars. So placing a trade with 1 standard lot and prices move by 20 pips, I will earn or lose $200 (20x10$ = 200$).

     

    • Mini lot

    Minilot equals to 1/10 of the standard lot valuei.e 0.1, so $10,000 if the base currency is the dollar.
    In this case, each pip is equal to $1, so if the prices move by 20 pips, I will earn or lose $20 (20x1 $ = 10$).

     

    • Micro Lot

    The microlot is 1/100 of a standard batch, or 1/10 minilot, i.e$1.000 .

    In this case each pip equals $0,1 so if the prices move by 30 pips, I will earn or lose $3 (30x0.10 $ = 3 $)

    In practice, if our broker offers us a leverage of 1: 100 and allows the purchase/sale of microlots, we would need only $10 to open a position ($1000 divided by 100). All brokers allow you to operate with minilots, but not all brokers allow you to operate with microlots.

Interviews

  • the Analyst's answer

    Jean Grossett - Financial analyst

    It is very important to mention that lot sizes and leverages should not be used by discretion. Risk management and money management should be put into consideration when entering lot size for trades. I will like to mention that in order for a trader to attain success at trading; his lot size must be decided/ generated as a function of the percentage of his investment capital that s/he is willing to lose. Most traders usually expose 2 percent of their capital on every trade.

    The second variable in the function is the amount of pips exposed, which is the difference between the potential trade entry price, and the proposed stop loss price. This makes for easy understanding of your risk exposure.

    To take on large lots with a small trading capital, a trader will have to apply for a larger leverage. This is not a topic for leverage, but bear in mind that taking on huge leverage has its down side, given that it exposes your capital to more risks as soon as the trades start going against your anticipated direction.

Members Comments

  1. Profile photo gravatar of Mikel Denesik
    Mikel Denesik (stanley91)
    says:

    In forex, one lot is 100,000 units of the base currency.
    Standard lot = 100,000 units
    Mini lot = 10,000 units
    Micro lot = 1,000 units
    The change in currency value relative to another is measured in “pips,” which is a very, very small percentage of a unit of currency’s value. In EUR/USD, each pip is worth $10, if lot size is one lot. This is how forex trading using leverage works. The amount of leverage you use will depend on the broker. Broker will require a trade deposit, also known as “account margin” or “initial margin.” Once you have deposited your money you will then be able to trade. The broker will also specify how much they require per position (lot) traded.
    For example, if the allowed leverage is 100:1 (or 1% of position required), you can to trade a position worth $100,000 by just having $5,000 in your account and any losses or gains will be deducted or added to the remaining cash balance in your account. The minimum security (margin) for each lot will vary from broker to broker.
    one lot.

  2. Profile photo gravatar of Waino Collier
    Waino Collier (frances80)
    says:

    Lot is equal to 1 portion of 100,000 units. You should be very careful about setting a lot because if you have a small balance for say 100$, then you cannot set a lot of 1 cent. This is a money management process. If you do not follow proper money management, you cannot last longer in this competition.

Leave a Reply