A lot refers to the smallest available trade size that you can place on your account. For example a micro lot is 1000 units of currency, meaning the smallest trade you can place is 1000 units (1 lot).
What is a Forex Lot
You can place larger trades, but the trade size must be an increment of 1000. As you may already know, 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. A standard lot is the equivalent to 100,000 units of the base currency in a forex trade. A standard lot is similar to trade size.
It is one of the three commonly known lot sizes; the other two are mini-lot and micro-lot. To take advantage of this minute change in value, you need to trade large amounts of a particular currency in order to see any significant profit or loss. Let’s assume we will be using a 100,000 unit (standard) lot size. We will now recalculate some examples to see how it affects the pip value.
USD/JPY at an exchange rate of 119.80(.01 / 119.80) x 100,000 = $8.34 per pip USD/CHF at an exchange rate of 1.4555(.0001 / 1.4555) x 100,000 = $6.87 per pip In cases where the U.S. dollar is not quoted first, the formula is slightly different.
EUR/USD at an exchange rate of 1.1930(.0001 / 1.1930) X 100,000 = 8.38 x 1.1930 = $9.99734 rounded up will be $10 per pip GBP/USD at an exchange rate or 1.8040(.0001 / 1.8040) x 100,000 = 5.54 x 1.8040 = 9.99416 rounded up will be $10 per pip.
Your broker may have a different convention for calculating pip value relative to lot size but whichever way they do it, they’ll be able to tell you what the pip value is for the currency you are trading is at the particular time. As the market moves, so will the pip value depending on what currency you are currently trading. Micro lot In forex, a micro lot equals 1/100th of a lot or 1,000 units of the base currency.
A micro lot usually is the smallest position size that you can trade with. As new traders often do not have much in the way of starting capital, trading micro lots is a good way to keep the overall exposure of their trading account small. Also see money management.If one micro lot of the EUR/USD is being traded, each pip would be worth $0.1, as opposed to $10 for a standard lot.
The following are the quantities typically used in the forex market: A standard lot = 100,000 units of base currency A mini lot = 10,000 units of base currency A micro lot = 1,000 units of base currency A nano lot = 100 units of base currency