Forex FAQ

How much is one lot in Forex trading?

In the Forex market, one standard lot is 100,000 units of base currency (which is equal to 10 units of quote currency per pip of price movement).


For example, in the case of GBP/USD (British Pounds vs US Dollars), to buy one lot would be to buy 100,000 British Pounds. This results in a gain or loss of 10 units of quote currency ($10 US Dollars, in this case) for every 1 pip of price movement. Meaning, if you bought one lot of GBP/USD at 1.4206 and it dropped by 1 pip to 1.4205, you are sitting on an unrealized loss of 10 US Dollars.

One standard lot was traditionally the smallest amount of base currency that can be traded on the interbank Forex market, which was appropriate considering the majority of its participants deal in millions of dollars at a time with the Tier 1 banks. Obviously, the same volatility on the typical retail currency trader's account (which typically has a much smaller balance than a million) would result in an extremely dangerous risk profile.

Due to the expansion of the online Forex trading (retail) market in recent years, many retail currency brokers began to offer much smaller lot sizes which are generally referred to as:

Mini Lots (10,000 units or 1 unit of quote currency per pip)
Micro Lots (1,000 units or 0.10 unit of quote currency per pip)
Nano Lots (100 units or 0.01 unit of quote currency per pip)

A small minority of brokers even offer single units as the denominator of trade size, which is only really practical for traders with very small risk capital to trade with.

In general, the mini, micro, and nano lot sizes are far more appropriate for the typical retail trader's account size than Standard Lots. (Professionals who trade with standard lots do so because their accounts are large enough to withstand the drawdowns, while beginners with small accounts tend to try and fail due to the high Risk of Ruin factor.)

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