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Thread: What is a lot in forex?

  1. #1
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    Default What is a lot in forex?

    In the previous article you learned what a pip is and how to calculate the value of a pip You probably remember that we got some extremely low pip value, on USD/CHF one pip was worth only 0.00009250 USD.

    Well, $0.00009250 USD is the value of a pip per unit and the standard size of a lot is 100,000 units of the base currency. To open a trade, you need to buy or sell one or more lots. So, if you open a long trade with one standard lot on USD/CHF, you would be buying 100,000 units. Since USD/CHF has a per unit pip value of $0.00009250 USD, your pip value would be $9.25 USD per pip ($0.00009250 x 100,000 units).

    $9.25 USD per pip may sound like a lot. However, there are several different lot sizes in Forex:

    Standard lot = 100,000 units of base currency
    Mini lot = 10,000 units of base currency
    Micro lot = 1,000 units of base currency
    Nano lot = 100 units of base currency
    Nano and micro lots are a fantastic way to trade Forex without risking much money. When you first start trading, you do not want to be trading standard lots. If each pip is worth $9 USD, and you lose 100 pips, thats $900 USD gone. Micro lots allow you to learn Forex without risking the house.

    Now you can calculate the value of a pip per lot. The pip value we calculated in the previous article was based on a single unit. So, for every unit traded on a GBP/USD trade a pip is worth $0.00009998 USD. With a mini lot you have 10,000 units open, so each pip will be worth $0.9998 USD. Calculating how much you will make per pip on a trade is straight forward.

    First step: Calculate the per unit value of a pip.

    USD/JPY = 96.27


    0.01 / 96.27= 0.0001038 1 pip = 0.0001038 USD per unit
    Second step: Multiply the per unit value by the lot size you are using.

    0.0001038 USD x 10,000 units = 1.038 USD
    If the US dollar is not quoted first and you want the pip value in US dollars, the formula is a little different.

    First step: Calculate the per unit value of a pip.

    GBP/USD = 1.6443=

    0.0001 / 1.6443= 0.00006081 1 PIP = 0.00006081 GBP
    Second step: Multiply the per unit value by the lot size you are using.

    0.00006081 USD x 10,000 units = 0.6081 GBP
    Third step: Multiply the value per pip by the rate of the pair.

    0.6081 GBP x 1.6443 = 0.9998 GBP
    Round this up to $1 per pip.

    These numbers still donít seem very good. Why would you want to invest $10,000 and earn only $1 per pip? Well, with leverage, you donít have to invest that much.

  2. #2
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    When using lot for trading, we should adjust with our fund for trading. We must have good money management to make our funds be more maximal when trading. When we start trading, try to use smallest lot size and try to more understand about market forex

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    When we want to trade, we must have basics of knowledge including terms of forex trading, what is leverage, spread, lot, etc. And we also must know that we should start trading with small lot here. Surely, try to use demo account first.

  4. #4
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    Quote Originally Posted by painofhell View Post
    In the previous article you learned what a pip is and how to calculate the value of a pip You probably remember that we got some extremely low pip value, on USD/CHF one pip was worth only 0.00009250 USD.

    Well, $0.00009250 USD is the value of a pip per unit and the standard size of a lot is 100,000 units of the base currency. To open a trade, you need to buy or sell one or more lots. So, if you open a long trade with one standard lot on USD/CHF, you would be buying 100,000 units. Since USD/CHF has a per unit pip value of $0.00009250 USD, your pip value would be $9.25 USD per pip ($0.00009250 x 100,000 units).

    $9.25 USD per pip may sound like a lot. However, there are several different lot sizes in Forex:

    Standard lot = 100,000 units of base currency
    Mini lot = 10,000 units of base currency
    Micro lot = 1,000 units of base currency
    Nano lot = 100 units of base currency
    Nano and micro lots are a fantastic way to trade Forex without risking much money. When you first start trading, you do not want to be trading standard lots. If each pip is worth $9 USD, and you lose 100 pips, thats $900 USD gone. Micro lots allow you to learn Forex without risking the house.

    Now you can calculate the value of a pip per lot. The pip value we calculated in the previous article was based on a single unit. So, for every unit traded on a GBP/USD trade a pip is worth $0.00009998 USD. With a mini lot you have 10,000 units open, so each pip will be worth $0.9998 USD. Calculating how much you will make per pip on a trade is straight forward.

    First step: Calculate the per unit value of a pip.

    USD/JPY = 96.27


    0.01 / 96.27= 0.0001038 1 pip = 0.0001038 USD per unit
    Second step: Multiply the per unit value by the lot size you are using.

    0.0001038 USD x 10,000 units = 1.038 USD
    If the US dollar is not quoted first and you want the pip value in US dollars, the formula is a little different.

    First step: Calculate the per unit value of a pip.

    GBP/USD = 1.6443=

    0.0001 / 1.6443= 0.00006081 1 PIP = 0.00006081 GBP
    Second step: Multiply the per unit value by the lot size you are using.

    0.00006081 USD x 10,000 units = 0.6081 GBP
    Third step: Multiply the value per pip by the rate of the pair.

    0.6081 GBP x 1.6443 = 0.9998 GBP
    Round this up to $1 per pip.

    These numbers still don’t seem very good. Why would you want to invest $10,000 and earn only $1 per pip? Well, with leverage, you don’t have to invest that much.
    When we do alot of trading, say full time trading,we need a minimum of 50k dollars according to me. We go full scale and manage huge amounts of money.

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    Quote Originally Posted by fhj View Post
    When we do alot of trading, say full time trading,we need a minimum of 50k dollars according to me. We go full scale and manage huge amounts of money.
    If we use huge amounts of money for trading in forex,we must decide lot which we should use for trading. Traders must understand, how much our trading capital, if we can't minimize the risk, manage our money well, we will lose it. i think, try to use small amount of money and also small lot size when trading

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    I can't afford using more than 5% of my deposit on each trade, I think it's a wise money managment. My deposit ususally is about $2000, I'm not a full-time trader, so I move slowly and can't make money only with forex. What is your average deposit?

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    Quote Originally Posted by Rita Ronker View Post
    I can't afford using more than 5% of my deposit on each trade, I think it's a wise money managment. My deposit ususally is about $2000, I'm not a full-time trader, so I move slowly and can't make money only with forex. What is your average deposit?
    Yes, i think we should have good money management skills to be able to make our trading capital increase. But we also must remember that forex is risky business. So not only money management , but we also must have risk management. I only start trading with $100. It's small amount for some traders but for me, it's enough

  8. #8
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    Not only money management that must be sharpen, our trading strategy management, and our emotional management also need to be pay attention-ed. For minimizing our loses, we can also using any forex bonus program to increase our profit, i've found good sources here Forex bonus on your deposit from LiteForex

  9. #9
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    The equivalent to 100,000 units of the quote currency in a forex trade. A standard lot is similar to trade size. It is one of the three commonly known lot sizes; the other two are mini-lot and micro-lot.

  10. #10
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    Nothing is a lot in Forex. You can earn limitless throughout the Forex. You can make much money from Forex Trading. All you need is to gain enough knowledge regarding Forex trading.

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