What Is A Lot In Forex? – Full Breakdown

Introduction

You know which market you want to trade on and you’ve worked out how to use some market indicators to analyze price data, but have you chosen your “forex lot size”?

Most learning will apply before the trade itself, but there are some key elements to a trade which might not be self-explanatory. Firstly, you need to decide the nature of your trade. Do you want to leverage funds, hedge your investment with correlated assets or something else? After determining this, you’ll need to confront the forex style pricing, which will certainly include “lot sizes”.

What Is Forex Lot Size?

There are four different lot size categories: standard, mini, micro, and nano. A standard lot is 100,000 units of a currency. A mini lot is 10,000. A micro lot is 1,000 and a nano lot is 100. Let’s apply this forex lot size chart to an imaginary currency pairing between British pounds and US dollars. Remember, currencies always come in pairs: the currency you are buying and the currency you are selling. If you buy a standard lot of British pounds and the exchange rate is 1.40 GBP/USD then you are purchasing £100,000 for $140,000.

The nano lot is not used very frequently by experienced traders, however it can be an affordable entry point for those beginning their trading careers. The micro lot is the smallest trading margin with most online brokers. Even beginners are often encouraged to opt for using mini lots, as it seems to be the sweet spot when you add on commissions and taxes. Like the nano lot, the standard is sometimes not an option with brokers. Putting so much capital into one trade could quickly burn through your account if the play doesn’t go your way. Without the right financial backup, it is generally not advisable.

Money Management In Forex

How much should you invest and how should you invest it? The answer to the first question may be ‘nothing’. Although there are strategies which can help you turn a profit, none of them can guarantee it. One investment option you have is to “hedge” your bets. These are techniques which will reduce your profits, but they will mitigate your losses too. A popular rule of thumb is not to exceed 1% of your total forex funds for each trade. Risk management in forex is practiced by all traders, from beginners to multimillion dollar companies.

TradeOr is the perfect place to learn about all of this. It offers members a “demo account” where they can trade using fake money but in real market conditions with popular trading tools available to them. Users are then able to build genuine trading experience without risking any money. At the same time, they can trial the platform and decide whether it is the right brokerage for them. If you have any questions, TradeOr also has technical and expert teams ready to help.

Final Thoughts

There is a lot of technical jargon in forex, but it doesn’t take long to understand it. Every trader has to learn the basics at one stage, however, not every trader has to learn the hard way. If anything is unclear, technical, as well as expert, support teams are on standby to help. TradeOr also has the advantage of being a highly reputable and trusted online forex broker.