Glossary
Lot
The standardised unit of trade size in forex — a standard lot is 100,000 units of the base currency.
Lot, explained
A lot is how forex measures position size. A standard lot is 100,000 units of the base currency, a mini lot is 10,000 units (0.1 lots), and a micro lot is 1,000 units (0.01 lots). Some brokers also offer nano lots of 100 units (0.001 lots). Most retail platforms let you trade in increments as fine as 0.01 lots.
Lot size directly drives pip value and therefore risk: bigger lots mean more money per pip, both on the way up and the way down. Choosing a lot size is really a risk decision disguised as a size decision.
The reason forex standardised on lots is that currency moves are tiny in percentage terms — a one-pip move is a hundredth of a percent. Trading in 100,000-unit blocks (with leverage providing the buying power) is what makes those small moves add up to meaningful money.
Rather than picking a lot size by feel, professionals derive it from a fixed-risk rule — decide the dollars you will risk, measure the stop in pips, and let the maths return the correct lot size. The lot is the output of the risk calculation, never an arbitrary input.
A common mistake is reading a strategy that says it makes 'X pips' and assuming the lot size is fixed too. Pips measure the move; lots measure your exposure to it. The same 50-pip win is a $5 result on a micro lot and a $500 result on a standard lot.
Frequently asked questions
- What is the difference between a lot and a pip?
- A pip measures how far price moved; a lot measures how big your position is. Multiply them (via pip value) to get the money result. The same pip move means more money on a larger lot.
- What is the smallest lot I can trade?
- Most retail brokers allow 0.01 lots (a micro lot, 1,000 units), and some offer 0.001 lots (a nano lot). This lets small accounts size positions precisely to keep risk controlled.
Related terms
Lot Size
How many lots (units) you trade on a position — the lever that converts a pip move into account dollars.
ReadPip Value
What a single pip is worth in money — it depends on the pair and your position size.
ReadPosition Sizing
Deciding how large a trade to take so that a loss costs a fixed, pre-planned amount.
ReadLeverage
Borrowed buying power that lets you control a large position with a small deposit — and that magnifies both gains and losses.
Read
Put it into practice
Education modules
Free tools
More terms in the glossary.
Vocabulary is the easy part. See how the desk turns these concepts into structured trades with defined risk on every position.