Key takeaways
- A lot is a standardized trade size measured in units of the base currency.
- A standard lot is 100,000 units, a mini lot 10,000 and a micro lot 1,000.
- Lot size directly sets pip value, so it controls how much you gain or lose per pip.
- Brokers usually allow fractional lots such as 0.01 or 0.25, which helps with precise position sizing.
Contents
When you place a forex trade, you choose how much of the base currency to buy or sell. Rather than typing a random number, traders usually express size in lots. Lot size is one of the most important choices you make, because it decides how much each pip is worth and therefore how much money is at risk.
What a lot is
A lot is a standardized quantity of the base currency. The common sizes are:
| Lot type | Units of base currency | Written as |
|---|---|---|
| Standard lot | 100,000 | 1.00 |
| Mini lot | 10,000 | 0.10 |
| Micro lot | 1,000 | 0.01 |
| Nano lot (some brokers only) | 100 | 0.001 |
Most trading platforms let you enter the size in standard lots with two decimal places. So 0.10 is a mini lot, 0.01 is a micro lot, and 0.25 is 25,000 units.
Remember that units are in the base currency. One standard lot of EUR/USD is 100,000 euros; one standard lot of USD/JPY is 100,000 US dollars. See Base and quote currency if this is unclear.
How lot size changes pip value
Pip value grows in direct proportion to lot size. For pairs where the US dollar is the quote currency, such as EUR/USD or GBP/USD, the numbers are easy:
| Size | Units | Pip value |
|---|---|---|
| 1.00 lot | 100,000 | $10.00 |
| 0.50 lot | 50,000 | $5.00 |
| 0.25 lot | 25,000 | $2.50 |
| 0.10 lot | 10,000 | $1.00 |
| 0.01 lot | 1,000 | $0.10 |
For pairs quoted in other currencies, pip value must be converted, as shown in What is a pip?. The Pip Calculator handles this automatically.
Notional value: the real size of your position
The notional value is the full value of the position, not just the money you put up. It is calculated as:
Notional value = units × exchange rate (expressed in the quote currency)
Assume EUR/USD is quoted at 1.0850. One standard lot is 100,000 euros, so its notional value is 100,000 × 1.0850 = $108,500. A mini lot is $10,850 and a micro lot is $1,085.
Brokers that offer leverage let you control this notional value with a smaller deposit called margin. That is why a trader with a few thousand dollars can open a position worth more than $100,000, and why lot size needs careful thought.
Worked example: same move, different lot sizes
Assume GBP/USD is quoted at 1.2700 and moves 40 pips against three traders who each bought at that price.
| Trader | Lot size | Units | Pip value | Loss on 40 pips |
|---|---|---|---|---|
| A | 0.03 | 3,000 | $0.30 | $12 |
| B | 0.30 | 30,000 | $3.00 | $120 |
| C | 3.00 | 300,000 | $30.00 | $1,200 |
The market move is identical; only the lot size differs. For someone with a $3,000 account, Trader A's loss is 0.4% of the account, Trader B's is 4% and Trader C's is 40%. Choosing a lot size is really choosing how much you are prepared to lose.
Choosing a lot size
Rather than picking a favorite lot size, many traders work backward from risk:
- Decide the maximum amount you are willing to lose on the trade.
- Decide where your stop-loss will be, in pips.
- Divide the risk amount by (stop distance in pips × pip value per lot).
For example, risking $50 with a 25-pip stop on EUR/USD gives $50 ÷ (25 × $10) = 0.20 lots. This method is covered fully in Basic risk management, and the Lot Size Calculator can do the arithmetic for you.
Common mistakes
- Copying someone else's lot size. A size that suits a large account can wipe out a small one.
- Confusing 0.1 with 0.01. One extra zero changes your exposure tenfold.
- Ignoring notional value. A small margin deposit can hide a very large position.
- Keeping the same lot size for every trade. If your stop distance changes, your risk changes too.
Summary
A lot is a standard trade size in units of the base currency: 100,000 for a standard lot, 10,000 for a mini and 1,000 for a micro. Lot size sets pip value and notional exposure, so it determines how much each price move gains or loses. Sizing positions from your risk limit, rather than habit, is one of the simplest ways to keep losses under control.
Glossary terms in this lesson
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Practice worksheet
Practice worksheet
5 exercises to try on paper. Print it, save it as a PDF from the print dialog, or download a plain-text copy.
- Convert these to units: 2 standard lots, 0.5 lots, 0.07 lots, 3 mini lots.
- Calculate the pip value in US dollars for 0.25 lots of AUD/USD.
- Assume EUR/USD is 1.0850. Calculate the notional value in US dollars of 0.4 standard lots.
- You buy 0.15 lots of EUR/USD at 1.0850 and close at 1.0822. Calculate the result in US dollars, ignoring costs.
- Explain why a beginner might prefer to practice with micro lots rather than standard lots.
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