Lot
The standardized unit of trade size in forex.
Also called: standard lot · mini lot · micro lot · lot size
Written by Javier Sánchez Ros
In plain language
A standard lot is 100,000 units of the base currency. A mini lot is 10,000, a micro lot 1,000, and some brokers offer nano lots of 100.
Lot size is the forex equivalent of share count. It is the variable you adjust to bring a trade’s risk in line with your risk budget.
Because lots are large and leverage is common, small errors in lot sizing produce disproportionately large errors in risk.
Worked through
A $5,000 account risking 1% on EUR/USD with a 25-pip stop
- Risk budget
- $50.00
- Stop distance
- 25 pips
- Affordable risk per pip
- $2.00
- Lot size
- 0.20 lots
The order runs one way only. First the risk budget: 1% of $5,000 is $50. Then what a pip can be allowed to cost: $50 spread over a 25-pip stop is $2 a pip. Only then the lot size, because $1 a pip is a mini lot, so $2 a pip is two mini lots — 20,000 units, or 0.20 standard lots.
Notice that lot size is the last number produced and the only one not chosen. Every trader who starts the other way round — deciding to trade one lot and then placing a stop — has fixed their risk at whatever the chart happens to hand them.
On this account one standard lot would be $10 a pip. The same 25-pip stop would then risk $250, which is 5% of the account, on a trade the trader believed was a 1% risk.
Why it matters
Choosing lot size before calculating risk is the most common forex sizing error. It should be the output of the calculation, not the input.
Common mistakes
- Trading a standard lot on a small account because the platform defaults to it.
- Confusing lot sizes between broker platforms that label them differently.
Keep exploring
These concepts are connected. Understanding one usually makes the next one easier.
How much one pip of movement is worth in your account currency, given your position size.
The standard smallest price increment in a currency pair — usually 0.0001.
The amount of an asset you buy or sell in a single trade.
Using borrowed capital to control a position larger than your account balance.
The capital your broker requires you to post to open and hold a leveraged position.