Glossary
Lot Size
How many lots (units) you trade on a position — the lever that converts a pip move into account dollars.
Lot Size, explained
Lot size is the specific quantity you put on a trade, expressed in lots: 1.0 (standard), 0.1 (mini), 0.01 (micro) and so on. It is the single biggest control you have over how much a trade can win or lose.
The disciplined way to set lot size is backwards from risk: decide the percentage of your account you are willing to lose, convert that to a dollar amount, then divide by your stop distance multiplied by pip value. The result is the lot size that keeps risk constant regardless of how wide the stop is.
Because the calculation includes stop distance, lot size naturally shrinks when a setup needs a wide stop and grows when the stop is tight. This is the point that confuses newcomers: a wider stop does not mean more risk if you size down to match it. Risk is held constant; only the lot changes.
Letting lot size float by emotion — sizing up after wins, down after losses — is one of the fastest ways to undo an otherwise good strategy. So is using a fixed lot regardless of stop width, which means every trade risks a different, unplanned amount.
On the desk we treat lot size as the final, mechanical step of a trade plan, not a gut call. Once the entry, stop and account risk are set, the correct lot size is simply whatever number the formula returns.
Frequently asked questions
- How do I choose the right lot size?
- Work backwards from risk: dollar risk ÷ (stop in pips × pip value per lot). That returns the lot size that risks exactly your planned amount, no matter how wide the stop.
- Should I increase lot size after a winning streak?
- Not by emotion. Increasing size only because you feel confident raises risk unpredictably. If you scale up, do it as a deliberate rule tied to account growth, not to recent results.
Related terms
Lot
The standardised unit of trade size in forex — a standard lot is 100,000 units of the base currency.
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.
ReadRisk-Reward Ratio
How much you stand to make versus how much you risk on a trade — the core of long-term profitability.
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Vocabulary is the easy part. See how the desk turns these concepts into structured trades with defined risk on every position.