Even if you aren’t from the trading world and haven’t yet stepped foot into a forex trading course, you might have heard about foreign exchange (forex) trading from your more financially sound friends.
Forex trading, though profitable, involves a lot of intricacies that need to be understood in depth over time. Among these concepts, is the idea of a forex trading lot.
What do you mean by a lot in forex trading?
A lot is used to define a unit of measurement that is used to standardize trading sizes. The changes in different currencies are compared up to the fourth decimal place which makes it unviable to trade a single unit.
Therefore, currency pairs are traded in large batches called lots that help traders make accurate calculations.
The value of a single lot is determined by an exchange of currency. This way, the involved people know the exact value of the asset they are trading when they open a position.
How many different types of lots exist in the forex domain?
There are primarily four types of trading lots in the forex domain. Let’s delve into each of them in detail.
- Standard lot: A standard forex lot is equal to a value of 100000 currency units. It is the most popular trading unit size in the trading world and is used by both institutional and independent traders. For instance, if the Euro to US Dollar exchange rate was $ 1.3000, a standard lot would be around 130,000 units.
- Mini lot: A mini lot is one-tenth of the size of a standard lot. Accordingly, its value is one-tenth of a standard lot. Using the same instance as above, the value would be 13,000 currency units.
- Micro lot: A micro lot is around one-tenth of the size of a mini lot and one-hundredth the size of a standard lot.
- Nano lot: A nano lot is one-tenth the size of a micro lot, one-hundredth the size of a mini lot, and one-thousandth the size of a standard lot.
Why is it important to learn about forex lots?
Trading in lots is integral to forex trading. Therefore, a better understanding of different lot sizes along with their features will help you pick up the basics of forex as a novice. Additionally, understanding lot sizes can help you shape your trading strategy well and earn better dividends.
How can you learn more about forex lots?
The best way to learn forex trading and lots would be to invest in a forex trading program that provides an optimal combination of theory and practice. A comprehensive trading program can also help you connect with industry experts and learn from their trading experience.
Start looking for appropriate trading programs from reputed trading schools around you today to become an experienced forex trader.
