Understanding lots helps you manage your risk and adjust your positions.
What is a lot in trading?
A lot is a unit used to buy or sell an asset in certain financial markets. It determines your position size and risk exposure.
Why do we use lots?
In Forex and index and commodity CFDs, trades use standardised sizes called lots.
For example, in Forex, one lot represents 100,000 units of the base currency, such as euros or dollars.
In crypto, there is no fixed lot. You buy a quantity directly, such as 0.8 BTC.
Different lot sizes
| Lot type | Size in units | Percentage of a standard lot |
|---|---|---|
| Standard lot | 100,000 | 100% |
| Mini lot | 10,000 | 10% |
| Micro lot | 1,000 | 1% |
| Nano lot | 100 | 0.1% |
Do you need €100,000 to trade a standard lot?
No. You can adjust your trade size to your capital and the risk you want to take.
For example, instead of trading 1 lot, or 100,000 units, you can trade 0.25 lots, or 25,000 units, or 0.03 lots, or 3,000 units.
Lot size calculators help you find the right size.
If you still want to trade 1 standard lot, you don't have to hold €100,000 in your account. You can use leverage.
For example, with 100:1 leverage, you can open a €100,000 position with €1,000 in your account.
Lot size alone isn't enough
Knowing the size of a lot doesn't tell you how much you make or lose when price moves.
For example, if you buy 1 lot of EUR/USD at 1.1060:
- If the price rises to 1.1070, how much do you make?
- If it falls to 1.1050, how much do you lose?
You can't answer without another concept: the pip.
What is a pip?
A pip is the smallest price movement used in certain financial markets.
In Forex, 1 pip is 0.0001 for standard pairs such as EUR/USD and GBP/USD, and 0.01 for Japanese yen pairs such as USD/JPY and EUR/JPY.
For example, if EUR/USD moves from 1.1060 to 1.1061, it has risen by 1 pip.
Pips are also used for commodities, but their size depends on the asset.
For gold, a pip represents $0.01, while for oil it represents $0.001.
You can read my article on pips to learn more.
The relationship between pips and lots
A pip measures a price change. To work out your profit or loss on a position, you also need to know the lot size.
The larger the lot, the greater the monetary value of a pip.
| Lot size | Value of 1 pip in EUR/USD | Value of 1 pip in EUR/JPY |
|---|---|---|
| Standard lot, 100,000 units | $10 | JPY 1,000 |
| Mini lot, 10,000 units | $1 | JPY 100 |
| Micro lot, 1,000 units | $0.10 | JPY 10 |
| Nano lot, 100 units | $0.01 | JPY 1 |
Examples
You buy 1 standard lot, or 100,000 units, of EUR/USD at 1.1060.
If the price rises to 1.1070, a gain of 10 pips:
- Value of 1 pip = $10
- Profit = 10 pips × $10 = +$100
- An equivalent loss = 10 pips × -$10 = -$100
If you'd taken 1 mini lot, or 10,000 units:
- Value of 1 pip = $1
- Profit = 10 pips × $1 = +$10
- An equivalent loss = 10 pips × -$1 = -$10
You can use my position size calculator to manage your risk better and avoid unpleasant surprises.
