What is Forex Lot
As a beginner forex trader, it is important to understand forex lot term clearly. It has great importance on your forex success. all other articles about What is Forex.
As a beginner forex trader, it is important to understand forex lot term clearly. It has great importance on your knowledge and success. In Forex trade, lot term represents size or a bundle of units. It means, this term related to the size of your trades. Or in other words, lot includes the amount of currency units in a trade.
In Forex market, there are 3 different lot sizes. The smallest one called micro and it stands for 1.000 units of currency. The other one called mini which is bigger than nano and it represents 10.000 units of currency. Also there is another lot size in forex trade. It is called Standard and it includes 100.000 units.
Here is the table for you to understand clearly:
Micro = 1.000 units
Mini = 10.000 units
Standard = 100.000 units
In this point we have to remind that the smallest trade size that you can make is the multiples of these units. For example, as we mentioned above micro lot size refers 1000 units or 1k. In this respect, you can trade only multiples of 1k such as 5k, 8k, 158k..In general, if a trader buy 10 lots of USD it means that he is buying 10k or 10000 currency units.
Actually mini and standard size of lots are older Fx trade sizes. These describe larger size of trades. In the beginning 100k was the minimum trade size and it was called standard. Then, it was reduced to 10k. Eventually from now on, minimum trade size is 1000 units or 1k and it is called micro lots. Beside that, there is also special size of lot which is called yard and it represents 1 billion units. And all these correspond different pip values.
Basically, the risk that you take increases when you trade more lots. In this respect, if you are trying to manage your risk, you should reduce the amount of lots. Especially, beginner forex traders should be careful about this and at first they should try to get use to it with demo accounts.