A lot is commonly referred to as a minimal traded amount for each currency transaction. There are three (3) of lots, namely:
- Micro lot
- Mini lot
- Standard lot
We can, therefore, conclude by saying that forex trading is done in currency lots as our unit of measurement for execution. The higher the lot you use for trading a currency pair, the greater the chances of making tons of profit, however, this will equal the risks of loss.
- 1 Micro lot = US$0.10 per pip
- 1 Mini lot = US$1 per pip
- 1 Standard lot = US$10 per pip
And so depending on how much you want to make, and how much you have deposited and really looking at your trading plan – that will guide you on which account suit you best.
In the trading adventure, you’d come to learn that, in a micro account, with a minimal traded amount of 0.01 Lot – which gets up to 1000 units worth of foreign currency, you can still trade in incremental of 1000 units, i.e. 2000, 3000, 5000, 8000 etc.
In a mini account, with a minimal traded amount of 0.10 Lot – which gets up to 10 000 units worth of foreign currency, you can still trade in incremental of 10 000 units, i.e. 20 000, 30 000, 50 000, 80 000 etc.
In a standard account, with a minimal traded amount of 1 Lot – which gets up to 100 000 units worth of foreign currency, you can still trade in incremental of 100 000 units, i.e. 200 000, 300 000, 500 000, 1 000 000 etc.
What do the above examples mean?
This simply means in a Micro Account, that is a 0.01 lot of up to 1000 units – it means to trade 5000 units of the same account, you would have to trade 0.05 lots.
To trade 7 000 units of the same Micro Account, you would have to trade 0.07 lots.
Now, in a mini account, that is a 0.1 lot of up to 10 000 units – to trade 20 000 units, you will have to trade 0.2 lots, to trade 90 000 units you’d have to trade 0.9 lots of the mini account.
If you have a standard account, 1 standard lot equals 100 000 units, if you want to trade 1 000 000 units, you’d have to trade 10 lots.
If you have a leverage of 100:1 and your deposit funds are $1000 – this means for a standard account to trade 300 000 units you would need $300 to open a position, with 3 lots – if the market goes your way with 50 pips, that’s 50 x $10 = $500, this can be achieved within seconds, minutes, and or hours.