What is a 1 Lot in Forex?
A Lot in forex is basically a unit that measures the transaction amount in foreign exchange. It refers to the number of a currency unit that maybe you will buy or sell. If you order in the foreign trading platform, you need to place an order in a Lot. This is slightly different from the stock market.
Anyways, maybe you are wondering what is a Lot in forex. If you are, we can say you are in the best place. We have been working in this sector for a long time. So, without wasting your time, let’s clear all of your confusion regarding this topic.
By the way, if you are a beginner and want to understand full forex trading in-depth, you can check out Beginners Trading Guide.
What is a 1 Lot in Forex?
Lot is a very important term in foreign exchange. It will also help you to determine the risk of your trading. If we want to define a Lot simply, then it will be, a Lot is mainly a standard unit for calculating the amount of currency. When you want to invest your money, you need to invest in a Lot (which an amount of currency).
For, example, you will not be able to buy 100 dollars exactly. You have to buy one Lot, two Lots, and more according to your need. We hope you have understood. Now the question is, a 1 Lot means how many units of currency? Here the answer is, it depends on the types of Lots. The different types of Lots are given below:
Standard
A standard Lot equals to 1,00,000 unit of the base currency. For instance, you are buying a standard Lot (100000 units) of USD/EUR, where the exchange rate is 1.50 (1 USD-1.50 EUR). In that case, you will purchase 1,00,000 USD with 1,50,000 EUR.
Now here, when the rate is increased, the value of your Lot will be increased too. This is about a standard Lot.
Mini
A mini Lot is ten per cent of a standard Lot. That means, a mini Lot (1,00,000*10%) = 10,000 base units of currency. So, you are buying 1 mini Lot means you are buying 10,000 base units of currency. This one is the best option for people who want to trade forex with a lower with no leverage.
Micro
A micro Lot is one per cent of a standard Lot which means one micro Lot is (1,00,000*1%) = 10,000 units of a base currency. This Lot is very favourable for the brokers and the best option for beginner forex traders. Micro Lot is the second smallest Lot.
Nano
A Nano is 0.1% of standard Lot (1,00,000*0.1%) = 100 units of base currency. This Lot is sometimes called ‘cent Lot’ by the brokers. Here one interesting thing is, some brokers also use 10 base currency term. So, you can also try this out also.
What is the best Lot size in forex?
This is a very frequently asked question that what is the best Lot size in forex. We hope after reading the previous topic, you know the answer. Well, then again, we are saying that a Lot can’t be worst of the best. It is dependent on:
Deposit amount:
The amount of your deposit is the most considering factor. If your amount is low, then you have to choose the lower amount.
Rules of risk management:
Everyone doesn’t have the same quality for taking the risk. Maybe you are the beginner and don’t want to take higher risk. In that case, you need to buy a mini or micro Lot for you.
Your profit target:
If you want a huge profit, then you need to buy a standard Lot where the chance of getting a profit is the most. On the contrary, when your target is lower, your choice should be mini, micro or nano. It is up to you.
Market situation:
The market situation is a very significant considering factor here. When you notice that there has a huge chance of reducing the demand for your currency, then you obviously should not invest in a standard Lot.
These are the fundamental factors to determine which Lot will be the best for you. After knowing these, we hope now you can determine it.
The Bottom Lines
Knowing the trade volume is important for the strategy of trading as well as your profit. A bigger Lot means bigger risk and ultimately bigger profits or losses. At the same time, a Mini or Nano Lot means shorter risk, and it is very suitable for the beginner.
Well, in this article, we have conducted a detailed discussion on what is a 1 Lot in forex. We hope this article will be very beneficial to you. After reading this article, what’s on your mind? Have you understood everything you want from here? Let us know in the comment section.
