What Is Lot Size in Forex
Understanding Trade Size and Position Value
Introduction
In Forex trading, you don’t buy “1 dollar” or “100 dollars” of a currency pair.
You trade in lots.
Lot size determines:
• How big your trade is
• How much money you control
• How much you gain or lose per price movement
If you don’t understand lot size, you cannot control risk properly.
What Is a Lot?
A lot is a standardized unit that represents the size of your trade in the Forex market.
Think of it as the quantity of currency you are buying or selling.
In Forex, the standard lot sizes are fixed.
Types of Lot Sizes
1️⃣ Standard Lot
= 100,000 units of currency
If you trade 1 standard lot of EUR/USD, you are controlling 100,000 euros.
This is large and not suitable for beginners.
2️⃣ Mini Lot
= 10,000 units
Smaller than standard.
Still significant for small accounts.
3️⃣ Micro Lot
= 1,000 units
Most beginner-friendly size.
Safer for learning and small accounts.
4️⃣ Nano Lot (Some Brokers)
= 100 units
Very small exposure.
Used mainly for practice accounts.
Why Lot Size Matters
Lot size directly affects:
• Your risk
• Your profit
• Your loss
Bigger lot = bigger profit potential
But also bigger loss risk
Example: How Lot Size Changes Profit
Let’s assume:
You buy EUR/USD
Price moves 10 pips in your favor
Now see the difference:
1 Standard Lot → About $100 profit
1 Mini Lot → About $10 profit
1 Micro Lot → About $1 profit
Same price movement.
Different trade size.
Huge difference in money.
The Beginner Mistake
New traders often:
• Use large lot sizes
• Focus only on profit
• Ignore risk
This leads to fast account losses.
Lot size should match your account size.
How to Choose the Right Lot Size
Before opening a trade, ask:
• How much am I willing to risk?
• What is my stop loss distance?
• What percentage of my account is at risk?
Professional rule:
Risk only 1%–2% of your account per trade.
Example of Safe Lot Calculation
If your account has $1,000
Risk 1% = $10 maximum loss
If your stop loss is 20 pips
You adjust lot size so that 20 pips = $10
This keeps your trading controlled and disciplined.
Lot Size and Leverage
Lot size works together with leverage.
Even with small capital, leverage allows you to control larger lot sizes.
But this increases risk.
Never increase lot size just because leverage allows it.
Why Small Is Smart
Professional traders survive because they:
• Control lot size
• Protect capital
• Think long-term
Forex is not about big trades.
It is about consistent risk management.
Final Thoughts
Lot size is one of the most important concepts in Forex.
If you master lot size, you control risk.
If you ignore lot size, risk controls you.
Always calculate before you click.