You buy or sell a specific number of currency units in forex trading that are termed as '' lots,'' and trading is done in specific amounts. In trade, a lot consists of 100,000 units of the base currency. Some other standard lot sizes include mini, micro, and nano lots that are 10,000, 1,000, and 100 units.

Lot size affects the risk you're taking. It's the first thing you need to understand fully before plunging yourself into the forex market. Your best trading strategy can fail if you don’t know what lot sizes you should be using in your trade.

Understanding a Standard Lot

A standard lot consists of 100,000 units of any base currency. And, the one-pip movement for a standard lot means a $10 change. For instance, if you buy $100,000 against the Japanese yen at a rate of ¥110.00 and then if the exchange rate moves to ¥110.20, a 20-pip movement, you have made $200. Consequently, if the exchange rate decreases from 20 pips to ¥109.80, your net loss is $200. So, now you understand the term pip as well.

Now, retail Investors can make trades in small amounts like nano lots that consist of 100 units of the base currency, which is possible due to online brokers and more competition. Whereas, In the international market, banks trade with each other in the standard lot size.
Trading with different Lot sizes.

1. Trading with Micro Lots

Most brokers trade with Micro lots as the minor tradable lot is available. One thousand units of base currency are there in a micro lot. For example, if your account is funded in Australian dollars, a micro lot is worth $1,000 of the base currency.
However, if you are using a dollar-based pair in your trade, one pip would equal ten cents. Small currency units like Micro lots are beneficial for beginners who do not want to put a lot at risk and keep it to a minimum while gaining trading experience.

2. Trading with Mini Lots

A Mini lot is worth 10,000 units of the base currency. Account funding currency. Therefore, if you are using an account funded with dollars and using a dollar-based pair in your trade, each pip would be worth $1.00. Trading using mini lots is most suitable for the newbies in the market.

However, you may think that $1 is a small amount. But, in forex trading, the market can go high like 100 pips in a day and sometimes even in a few hours. If the market gains, it gives you a $100 profit; otherwise, if it moves against, then a $100 loss is also yours. After all, it's up to you how much risk you can tolerate.

3. Using Standard Lots

A standard lot is something that giant firms use while trading, and it consists of 100,000 units. And if you are using dollars in your trade, it is a $100,000 trade. Suppose you are trading in dollars, then your account value fluctuates by $10 for each pip movement. So, most ordinary traders with small accounts don't tend to trade in standard lots because if it goes against them, they will lose all balance in one trade.

Conclusion

No one likes to take risks when investing hard-earned money. Most forex traders trade in mini or micro lots to keep the risks low. Go and complete your Exness Registration that provides feature-rich accounts and meet the needs of today’s traders But mindfully choose lot size relative to your account size will help you continue trading for a long time.

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