What is forex lot size?
1 lot size has been observed to be differently used by different brokers. One broker might say one lot size is equal to 100,000 base units and another broker equates 1 lot size to 10,000 units. For traders who do not know much about lot size, this might be very confusing and there are a lot of questions to be asked. The truth is, there is a standard lot unit which all brokers and traders conform to; but then, brokers are of different levels.
It is universally acknowledged that one lot is equal to 100,000 base units. Many brokers operate with this standard, but some brokers, even though they accept that 1 lot is equal to 100,000 base units, make use of a different scale of 1 lot = 10,000 base units.
Types of brokers
Before joining the market, it is important you carry put proper research as to what broker to register with. You do not just walk into the market and register with any kind of broker on the basis that they are all brokers. They all might be brokers but they are unique in their own ways (the GUI of their platforms are different for starters).
- Dealing desk brokers
- Non-dealing desk brokers
Dealing desk brokers make money through spreads and liquidity provision for traders. They fill both buy and sell orders for their client, thereby literally creating a market for their clients. This is unlike the no-dealing desk brokers that do not take the sides. All they do is link two parties together.
Talking about lot sizes, some broker may equate 1 lot size to 10,000 base units, even when it is known that the standard for 1 lot size is 100,000 base units. This is simply because all brokers do not operate the same type of account. When a broker is operating a mini account, a lot of things change in the mode of operation, including the how many base units goes for a lot size. In essence, the type of account a broker operates determines if a lot size is 100,000 unit (which is standard), or less than that.
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.