Before you enter forex trading, one of the first words you should know is "lot size," because it is a unit measuring a transaction amount in the forex market. In this article, we will use a word that is easy to understand by using the word "lot."

Get To Know Lot Size

The volume traded in the forex market that is set by the user is referred to as a lot. More importantly, using different lots will also affect the amount of loss or profit.

Type of Lot Size 

There are many types of lots such as standard lot, mini lot, micro lot, and nano lot. Each type will have different contract size as follows:

- 1 standard lot has a contract size equal to 100,000 units of the base currency.

- 1 mini lot has a contract size equal to 10,000 units of the base currency.

- 1 micro lot has a contract size equal to 1000 units of the base currency.

- 1 nano lot has a contract size equal to 100 units of the base currency.

This is why specifying the number of lots in different account types affects profit and loss.

How to Calculate Lot Size

From the above, if you trade 1 standard lot, you need 100,000 units of the base currency. This causes the broker to offer you something called "leverage" so that you can make a transaction. Lot Size is used to determine the profit and loss of that transaction.

For example, if you purchase 1 standard lot of EUR/USD at 1.10000 and the price rises to 1.10100, this is referred to as a 100 point up move. You can calculate the profit and loss from the formula: 

Lot Size * Price Move = 1*100.  This means you will make a 100-unit profit.

What Should Be Taken Into Account When Using Different Lot Sizes?

The use of lot size in trading varies depending on a number of factors, including:

1. Experience in Trading and Risk Control

If you have a lot of experience in trading, you can set a higher lot size.

2. Different Trading Strategies

In order to maximize the effectiveness of each strategy, different lot sizes should be set for each.

3. Acceptable Risk

Trading in large lots requires a willingness to take risks that may happen.

Inclusion

In summary, lot size is a customizable trading volume in the forex market. In summary, lot size is a customizable trading volume in the forex market. As a result, you should give it lots of thought and apply it sensibly if you want to avoid any potential risks.

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