What Is A Lot In Forex | Explained

What Is A Lot In Forex | Explained

What is a lot in Forex?

Lots, or the number of currency units you will buy or sell, are the most common units used in forex trading.

A “lot” is a unit measuring a transaction amount.

Orders are put in lots when you use your trading platform to place orders.

The standard size for a lot is 100,000 units of currency, and now, there are also mini, micro, and nano lot sizes that are 10,000, 1,000, and 100 units.

Some brokers display quantity in "lots," while others display currency units.
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As you may know, the change in the value of one currency compared to another is measured in "pips," which is a very small proportion of the value of a unit of money.

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.

Assume we'll be using a standard lot size of 100,000 units. We'll now recalculate some samples to observe how the pip value is affected.

1. USD/JPY at an exchange rate of 119.80: (.01 / 119.80) x 100,000 = $8.34 per pip
2. USD/CHF at an exchange rate of 1.4555: (.0001 / 1.4555) x 100,000 = $6.87 per pip

The methodology is slightly different in circumstances when the US dollar is not listed first.

1. 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
2. GBP/USD at an exchange rate of 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 use a different method of determining pip values in relation to lot size, but regardless of how they do it, they'll be able to tell you what the pip value for the currency you're trading at the time is.

To put it another way, they do all of your math calculations for you!

Depending on which currency you are trading, the pip value will change as the market changes.

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What Is A Lot In Forex | Explained