What are lots in Forex?

Emma Olivia

April 18, 2023

What are lots in Forex? In forex trading, 1 lot equals 100,000 units of the base currency. For example, if an investor enters a long 1 lot EUR/USD trade, they are buying 100,000 units of the Euro (the base currency) against the USD (the counter currency).

What are Lot size-types?

	Lots	Units
Standard	1.0	100,000
Mini	0.10	10,000
Micro	0.01	1,000
Nano	0.001	100

How to Calculate Auto Lot Size?

The ideal position size can be calculated using the following formula:

LotSize = Account Equity x Risk You are taking / (Stoploss in pips x Pip Value)

Consider a scenario where a forex trader has a starting account equity of $10,000 and aims to execute a trade with a risk per trade of 2% with a Stoploss of 67 pips. Applying the above formula yields:

Lot size = Account Equity x Risk you are taking / (Stoploss in pips x Pip Value)

Lot size = $10,000 x 0.02 / (67 pips x $10)

Lot size = $200 / (67 pips x $10)

Lot size = $0.29

Most commonly, lot size is rounded off to 2 decimal places.

If this USD 10,000 account, risking 2% (USD 200) and makes 10% in profit on a 10 Risk:Reward trade, you’ll now have an account balance of USD 12,000. Now on the next trade, your risk of 2% per trade will be USD 240. By using risk-based position sizing you will naturally scale your risk up and down depending on the size of your account and take advantage of the compounding gains effect.

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