What is a Lot?

 

Forex is traded in specific amounts called lots. The standard size for a lot is 100,000 units. There are also a mini, micro, and nano lot sizes that are 10,000, 1,000, and 100 units respectively.

Different brokers may use different terms like ‘trading lots’ and or ‘positions size’. Here, eToro uses the term ‘units’. Basically it all amounts to the same thing – your trade size.

For example, 1,000 units here on eToro is the same as 0.01 lot. Or if you were to look at the cost per pip, then 1,000 units (0.01 lot) will cost you $0.10 per pip.

As a trader, it is advisable to know how much is needed for your Stop Loss or how much you’re willing to invest in each trade. This will help you to determine your trade sizes.

For example, a trade size of 1,000 units ($0.10 per pip) requires $20 for a 200 pips SL away from the entry price; similarly a trade size of 4,000 units ($0.40 per pip) requires $80 for a 200 pips SL away from the entry price. If your account can't afford an ‘investment’ of $80 per trade, then a trade size of 4,000 units is too significant for your account.

It is important to note that pip value does not vary based on the amount of leverage used, but rather that the amount of leverage you have affects the pip value. This means that If you have 100:1 leverage you can trade a mini lot (10,000 units) with just 100 units.