What Is a Lot?
Forex is traded in lots. Your lot size decides how much money each pip you win or lose is worth.
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
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Text version · Forex Basics, lesson 5: “What Is a Lot?”
Forex is traded in lots. Your lot size decides how much money each pip you win or lose is worth.
1 lot = 100,000 units of base currency
A lot is the unit of size in forex. 1 standard lot = 100,000 euros, 0.1 lots = a mini lot, 0.01 lots = a micro lot.
P&L = pips × pip value
Lot size sets the pip value: for EUR/USD, quoted in dollars, 1 standard lot is exactly $10 per pip.
The smaller the lot, the gentler the swings
Same market move; your lot size decides how much it hits your account. Beginners should feel real moves with 0.01 lots first, then do position sizing based on the loss they can afford.
Key takeaways
- 1 standard lot = 100,000 units of the base currency; 0.1 lot = a mini lot; 0.01 lot = a micro lot.
- For pairs quoted in US dollars (like EUR/USD), 1 standard lot is worth $10 per pip and 0.01 lot is worth $0.10 per pip.
- P&L = pips × pip value. For the same move, the bigger the lot size, the more money changes hands.
Try it yourself
You can do these exercises in this lesson's interactive simulation:
- Click "1" lot and set the price move to +1 pip: what's the P&L on the right?
- Click "0.5" lots with a +20-pip price move: work it out in your head first, then check the P&L on the right.
- Drag the lot size to 1.50: how many layers does the grid become? How many euros does "Contract units" show?
- Keep the price move the same and look at the table below: how many times bigger is the P&L for 1 lot than for 0.01 lots?
Quiz and explanations
- 1. You trade 1 standard lot of EUR/USD and the price moves 1 pip. Roughly what's your P&L?
- Answer: $10.1 lot is $10 per pip; 0.1 lot is $1; 0.01 lot is $0.1.
- 2. You make 20 pips on 0.5 lots of EUR/USD. Roughly what's your profit?
- Answer: $100.0.5 lots is $5 per pip, so 20 pips = $100.
- 3. You trade 0.03 lots of EUR/USD and lose 40 pips. Roughly what's your loss?
- Answer: $12.0.03 lots is $0.30 per pip, and 40 pips × $0.30 = $12.
Terms in this lesson
- lot (Lot): The unit of trade size in forex: 1 standard lot = 100,000 units of the base currency; 0.1 is a mini lot and 0.01 a micro lot.
- pip (Pip): The smallest standard price unit in forex; for EUR/USD, 1 pip = 0.0001.
- pip value (Pip Value): How much your profit or loss changes when price moves 1 pip, set by your lot size.
- position sizing (Position Sizing): Deciding how much to buy on each trade based on how much risk you can take.