Lot

In forex trading, a lot is the unit of quantity in which a trade is placed. The classic standard size of a lot in currency trading is 100,000 units of the base currency – the first currency of a currency pair. For EUR/USD, one standard lot therefore corresponds to 100,000 euros. That sounds like a large sum, but because forex is traded on a margin account, only a fraction of this amount has to be deposited as margin.

Lot sizes

On trading platforms, the trade size is usually entered in lots with decimal places: 0.01 lots is a micro lot. Nano lots are less common and only offered by some providers.

Example with EUR/USD

The lot size directly determines the value of a pip – the smallest standard price step in most currency pairs, 0.0001 for EUR/USD. For pairs in which the US dollar is the quote currency, such as EUR/USD, one pip is worth:

• $10 per standard lot (100,000 × 0.0001)
• $1 per mini lot
• $0.10 per micro lot
• $0.01 per nano lot

Example: a trader buys 0.5 lots of EUR/USD, i.e. 50,000 euros, at 1.1000. If the price rises by 40 pips to 1.1040, the profit is $200 (40 pips × $5 per pip); if it falls by 40 pips, the loss is also $200. With a margin requirement of 5% (leverage of 20:1), the trader has to deposit about $2,750 as margin for this position worth around $55,000.

Why it matters for traders

The lot size determines how much a trade gains or loses per pip – and therefore its risk. It is the main tool for position sizing in money management: a trader who wants to risk $100 on a trade with a stop-loss 20 pips away can trade 0.5 lots of EUR/USD, as each pip is then worth $5. Small lot sizes such as micro lots allow traders with small accounts to keep their risk per trade low.

Trading costs such as commissions are often charged per lot as well. Some services pay a cashback or rebate per traded lot, which can lower the effective trading costs, so it is worth comparing the conditions of different brokers. A rebate does not change the risk of the trades themselves, however.