Types of Lots in Forex
In this lesson, we’ll look at trading sizes and how forex is commonly traded in specific amounts
called lots.
Standard lots
A standard lot in forex trading equals 100,000 units of the base currency.
For instance, in the USD/JPY pair, one lot is valued at $100,000, reflecting the USD as the base
currency. Similarly, in GBP/USD, one lot equals £100,000, with GBP being the base currency.
Likewise, in EUR/USD, one lot corresponds to €100,000, given that the EUR is the base
currency.
Alternative lot sizes
The standard lot isn’t the only investment size in forex. There are also others to choose from.
These include the mini lot, which is one tenth of a standard lot, i.e. 10,000 of the base
currency. Additionally, there’s the micro lot, which is one hundredth of a lot, i.e. 1,000 units
of the base currency.
Lots used by different types of traders
Standard lots are typically used by professional traders who have substantial trading capital.
Mini lots, which are smaller in size, are used by intermediate traders who may have
less capital to invest. Micro lots are popular among beginners who are just starting out in
forex trading and wish to gain experience without risking too much capital.
Importance of lots
Understanding lots in forex is important due to its direct impact on exposure. Larger lot sizes
require more significant investments, leading to bigger potential returns or losses.