Lot sizes

A lot is the unit that measures the size of a forex position. Because currencies move in very small increments, trades are grouped into standard quantities so that everyone is speaking the same language about size. Once you know how lots work, you can see exactly how much each price move is worth to your account.

What a lot is

In forex, prices move in very small steps, so trading a single unit of currency would be impractical. A lot bundles those units into a standard quantity. When you open a position you are choosing how many lots to trade, and that choice sets the size of your exposure. Lots are measured in the base currency, which is the first currency named in a pair, so in EUR/USD it is the euro.

The four standard lot sizes

• Standard lot 100,000 units of the base currency.
• Mini lot 10,000 units, one tenth of a standard lot.
• Micro lot 1,000 units, one tenth of a mini lot.
• Nano lot 100 units, one tenth of a micro lot.

How lot size sets pip value

Lot size decides how much each pip is worth, which in turn decides how much you gain or lose when the price moves. As an illustration, suppose a pair is quoted in US dollars and one pip equals 0.0001. On a standard lot of 100,000 units one pip is worth about 10 dollars, on a mini lot about 1 dollar, on a micro lot about 10 cents, and on a nano lot about 1 cent. The units shrink by a factor of ten at each step, and so does the value of a pip.