Glossary · How do you trade forex?Lot
A lot is the standard unit of trade size in forex. One standard lot is 100,000 units of the base currency, a mini lot is 10,000 and a micro lot is 1,000. MetaTrader shows these sizes as volumes of 1.00, 0.10 and 0.01.
The volume you enter on a trade ticket is counted in lots. The lot size lesson covers contract sizes and how to choose a size from your risk.
Standard, mini and micro lots
Each common size is a tenth of the one above it. The pip value column assumes EUR/USD in a USD account.
| Name | Volume | Units of base currency | Pip value on EUR/USD |
|---|---|---|---|
| Standard lot | 1.00 | 100,000 | $10.00 |
| Mini lot | 0.10 | 10,000 | $1.00 |
| Micro lot | 0.01 | 1,000 | $0.10 |
The 100,000 rule is for currency pairs. Other instruments use their own contract size: on most MT4 and MT5 accounts, one lot of gold is 100 troy ounces.
What one lot is worth
A position's full value, its notional value, is units times price. With EUR/USD at an illustrative 1.10000, 1.00 lot is 100,000 × 1.10000 = $110,000.
Brokers ask only for a deposit called margin, set by your leverage. At 1:100 that lot needs $110,000 ÷ 100 = $1,100, and 0.10 lot needs $110.
The lot size calculator turns your risk and stop distance into a lot size.
Questions
How much is 0.01 lot?
On a currency pair, 0.01 lot is 1,000 units of the base currency. On EUR/USD each pip is then worth $0.10.
How many units are in 1 lot?
One standard lot of a currency pair is 100,000 units of the base currency. Metals and indices use their own contract sizes, so check your broker's specification.
Leverage multiplies losses as well as gains; only trade money you can afford to lose.
More terms in this chapter
Bid priceThe bid price is the price at which you can sell a currency pair right now. It is the lower of the two prices in every forex quote. You open a sell trade at the bid, and you close a buy trade at the bid.
Ask priceThe ask, or offer, is the price at which you can buy a currency pair right now. It is the higher of the two prices in every forex quote. You open a buy trade at the ask, and you close a sell trade at the ask.
PipA pip is the standard unit for measuring a change in a forex price. On most currency pairs it is 0.0001, the fourth decimal place, and on pairs quoted in Japanese yen it is 0.01. One tenth of a pip is called a pipette.
PipetteA pipette is one tenth of a pip, shown as the extra last digit of most forex quotes. On EUR/USD it is 0.00001, the fifth decimal, and on yen pairs such as USD/JPY it is 0.001. Traders also call it a fractional pip.
Market orderA market order is an instruction to buy or sell straight away at the best price available. A buy fills at the ask and a sell at the bid. You get a fast fill but not a guaranteed price, so in a fast market the fill can slip.
Pending orderA pending order is an instruction to trade later, once price reaches a level you set. Limit orders wait for a better price than now; stop orders wait for price to break through a level. Until it triggers, no position is open.
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