A lot in forex is the measurement unit of the transaction currency in a pair. When you buy or sell, your broker measures your position size in the lot.
Lot size means the number of “transaction currency” units bought or sold in the forex market.
In a forex pair, the first currency is transaction currency, and the second is the counter currency.
Generally, when traders talk about the LOT, they mean the standard one, 100k unit of transaction currency.
Types of Lot
To give more choices to its customers, brokers design many types of lots. These are:
- Standard lot: its size is 100k units of the base currency;
- Mini lot: its size is 10k of the transaction currency;
- Micro-lot: the size of the micro-lot equals 1k of the base currency; and
- Nano-lot: the nano lot size equals 100 units of the base currency.
What Lot Size Should You Trade?
The size of the lot you choose depends on your risk management, financial power, psychological strength, experience, and more.
If you are an experienced trader, rich, can manage your risk, and are psychologically strong; it does not make sense to trade in a micro lot.
On the other hand, if you have just started trading, and are also not rich, it is better to place small trades, experience the market, and gradually increase your position size.
The best size lot is the one that you are comfortable managing, can lose, and does not make you emotional.
How to Calculate Your Position Value (Lot in Forex) in Unit of Base Currency?
In the calculation of risk, lot, profit, and loss, the base currency is the same as the account currency. It is the currency that you want to measure your trading activities and select when opening a forex account.
Every trading platform automatically calculates the value of your position size in your account currency. You do not need to calculate yourself mathematically.
We have a widget (position size calculator) that calculates everything for you in a blink of an eye.
Just click here to go to the position size calculator page.
