Understanding the Forex lot sizes is important to do trade comfortably. It will avoid traders from the pitfalls of trading anonymously. One should know the quantity of different currencies in Forex 1 lot size. In fact, a lot size is a primary factor to learn how to start a trade. Regulatory institutes have set the lot size, and traders have to follow the same to trade.
What is a Forex 1 lot?
In general, a lot means a group of goods or services. In this phenomenon, 1 lot in Forex will represent the standard set of (quantity of) financial instrument (currency). In this aspect, traders are required to match up this minimum traded volume to initiate a trade on the security. The concept of the lot size has decreased confusions which mainly rise in trading hours.
For example, if you are trading on contracts, then a lot will be helpful in understanding the number of units one has to bring with each contract. This eases the process of assessment of the price per unit before investing.
Types of lot size:
For the betterment of traders, the regulatory bodies (exchanges) have offered different types of lot size. One has to keep in mind how much amount he or she will invest in trading. Types of lot in Forex include:
Standard Lot (100,000):
A standard lot in Forex is defined as the number of units that is equivalent to 100,000 units of base currency. In this case, one pip of currency pair will be equal to $10 (US Dollar).
For example, traders who are supposed to buy 100,000 units in US dollar are buying a standard Forex 1 lot of 100,000 units.
A mini-lot in Forex is defined as the (1/ 10)th of the standard lot of 100,000 units. In this case, one pip of currency will be considered as $1 that is the (1/ 10)th of the standard lot. In fact, traders are not constrained to make a trade on one mini-lot. If someone is willing to trade on 10 mini-lots, then it will be equivalent to one standard lot.
A micro-lot in Forex is defined as the (1/ 100)th of the standard lot of 100,000 units. This suggests that traders can make a trade with the accessibility of small increments. One should know that 100 micro-lots are equivalent to 10 mini-lots that are equal to one standard lot.
One should put his/ her trading skills at the top to gain as much profit as possible. Every trader is willing to get maximum profit share through trading. In this case, these are some suggestions only for you:
It is better to trade with minimum lot. This is because if something goes wrong, then you will incur a minimum loss.
Trade in a fewer lot keeps much of your investment safe for next trade.
Readers having any problem in understanding the facts on how to trade efficiently can watch tutorials or read books of Forex 1 lot trading to clear your viewpoints.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.