Taking a lot size in Forex Trading

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Taking a Lot Size in Forex Trading

When you start forex training, you'll find out about term called trading lots. A lot references the smallest available trade size that you can use when trading currency pairs in the forex market. Typically, all brokers will refer to lots by increments of 1,000, or a micro lot. It is significant to note that the lot size directly impacts and shows the amount of risk you're assuming.

Lot Size Determining:

Determining the best lot size with a tool like a risk management calculator or something similar with a desired output can help you set the best lot size based on your current trading account assets, whether you're establishing a practice trade (Demo Account) or trading live, as well as assist you infer the amount you would like to take a risk with .

The trading lot size directly impacts how much a market move affects your trading accounts. For example, a 100-pip move on a small trade will not be felt much as the same 100-pip move on a very large trade size.

You will see different lot sizes during your trading career, and they can be explained in the most prized books in the trading business.

 Micro Lots

Micro lots are the smallest tradable lot can be used to most brokers. A micro lot is a lot of 1,000 units of your trading account. If your account is funded in U.S. dollars, this implies that a micro lot is $1,000 worth of the base currency you want to swap. If you are trading a dollar-based pair, 1 pip would be equal to 10 cents only. Micro lots are really good for beginners that want to keep risk to a minimum while doing their trading.

Mini Lots

Before micro-lots, there were mini lots. A mini lot is 10,000 units of your trading account capital. If you are using a dollar account and trading a dollar-based pair, each pip in

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your trade would be worth about $1.00. If you are a novice and you desire to begin trading using mini lots, make sure that you're well-capitalized.

While $1.00 per pip seems like a small amount, in forex trading, the market can move 100 pips daily, sometimes even in an hr. If the market is moving against you, that leads to a $100 loss. It's up to you to determine your ultimate risk tolerance. But to trade a mini account, you should start with at least $1,000- $2,000 to be comfortable.

Standard Lots

A standard lot is a 100,000-unit lot. That is a $100,000 trade if you are trading in dollars. The pip size for standard lots is $10 per pip. That’s mean you will bear a $100 loss when you are down just 10 pips.

Standard lots are for institutional-sized accounts. That means you should have $20,000 or more to perform trades with standard lots.

Most forex traders are going to be trading mini lots or micro-lots. It might not feel attractive but keeping your lot size within reason relative to your account size will help you keep your trading capital safe to continue trading for the long term.

 

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