321

Fx 10000 lots unit is one of the lot sizes in which fx is traded. There are four different lot sizes; they are 100,000 units for standard lot size, 10,000 units for mini lot size, 1,000 units for micro lot size, and 100 units for lot size.

In the time past, it was customary to trade fx in specific amounts known as lots. Lots have a lot of similarities with a percentage in point; very negligible in small quantities. Currency movements are measured in percentage in point and as such depict the quantity of loss or profit made from price fluctuations in the market. A trader with a lower budget will get the less significant result and the one with a higher budget will get the more significant result; all regarding the amount of percentage in point generated by their trade capital. In that same manner, the lot size of a trade determines the monetary result of the trade, in terms of profits or losses.

THE CONNECTION BETWEEN LOT SIZE AND A PERCENTAGE IN POINT

To explain the relationship between lot size and percentage in point, let us take an instance of a Euro/US dollar transaction. In this transaction, a trader wants to buy a mini lot of 10,000 units of Euro/US dollar. Now, a trader buys 12000 Euro worth of US dollars, at the rate of 1.45917; with the anticipation that the Euro would strengthen against the dollar. Eventually, the Euro does strengthen against the Dollar and the exchange rate moves from 1.45917 to 1.46917, bringing the exchange rate to a marginal rise of 1 cent. 1 cent is equal to 100 percentage in point, and with a lot size of 10,000, the profit or loss of each percentage in point is $1. Here is how

To get the difference in value of the security:

1 pip = 10,000 lot size

1 pip = 1.46917 – 1.45917

1 pip = 0.01 dollar

With a lot size of 10,000

10,000 lot size = 0.01

10,000 lot size = 100 cents

10,000 lot size = $1

So if there is an upward movement to 100 percentage in point, there will be a profit of $100.

In this instance, with a lot size of 100,000 units, there would be a profit of $1000; with a lot size of 10,000 units, there will be a profit of $100; and with a lot size of 1,000 units, there would be a profit of $10.

BROKERS AND DIFFERENT DEFINITION OF LOT SIZE

The standard size for each lot is 100,000 base units but there are cases where a broker might equate each lot to less than 100,00 base unit. This might be the case with a broker with a mini account. A broker with a standard account, in most cases, makes use of the standard lot size base units of 100,000 units. This does not mean that the brokers with mini accounts cannot trade like the standard brokers but because he or she is operating a mini account, it is allowed to equate each lot size to less than 100,000 units.

Prev Next