Lots in Forex trading: definition

The three lot sizes

In the currency market, position size is expressed in lots. A standard lot is 100,000 units of the base currency, the first in the pair. A mini lot is 10,000 (0.1 lot) and a micro lot 1,000 (0.01 lot).

Buying 1 lot of EUR/USD therefore means buying 100,000 euros against dollars. With leverage, the capital tied up is only a fraction of that sum, but gains and losses apply to the whole amount.

Lots and pip value

On EUR/USD, a pip is worth 10 dollars per standard lot, 1 dollar per mini lot and 0.10 dollar per micro lot. A stop placed 30 pips away therefore represents a risk of 300 dollars on 1 lot, and 30 dollars on 0.1 lot.

Choosing size from risk

Position size isn't chosen by feel: it follows from the amount you accept to lose and the stop distance. Size in lots = risk in currency ÷ (stop distance in pips × pip value per lot).

Example: on a 10,000 euro account, a 1% risk (100 euros) with a 25 pip stop on EUR/USD gives, with a pip worth about 9.1 euros per lot when EUR/USD is at 1.10, a size of about 0.44 lot.

Frequently asked questions

How much does a lot cost in Forex?

You don't pay a lot's full price: you tie up margin. With leverage of 30, the margin for one lot of EUR/USD is about 1/30 of 100,000 euros, around 3,300 euros.

What lot size to start with?

The one that makes the loss at the stop a small fraction of the account, often 0.5 to 1%. For a small account, that means micro lots.