Lot Sizes in Forex

Lot Sizes in Forex

Lot Sizes in Forex

Forex trading requires the use of a leveraged account but it is important to understand how the leveraged account works before you decide to put money into the leveraged account. It is also crucial to understand the various lot sizes that are available for this purpose and which one is the best one for you.

Let's discuss the different kinds of sizes that are available for the lots that are available for leveraged accounts and see how you can use them in order to make optimum profit from your forex account.

The Normal Lot: The normal lot size that is required to begin the normal forex account is around $10.000. Most of the traders normally ask people to open a normal account with a minimum balance of $10,000. The regular way for trading with a normal lot is 1:100 leverage. What this means is that you are getting a loan from the broker to control $100,000 for your $1,000. Let's talk more about this in detail in order to give a better idea as to how you can make the best profit with the normal lot in your leveraged account.

For example when you have a leveraged account with a 1:100 percentage, then you gain $10 in profit for every pip. The leverage can be considered as a 2 way lane, it is important to understand the complete concept of trading with a leveraged account with a normal lot before you begin to start trading. Almost all markets swing around 100+ pips normally each day and that would mean around a gain of $9000 to $10,000 in a day with the 1:100 leverage. But the flip side is that you can also lose around the same amount in a single day in case the market loses 100 pips in case of a bad day in the forex market.

Mini Lots: Now let's talk about the Mini lot and how it works with leverage. Most traders expect a minimum of at least 1 mini lot in order to do trading with a mini lot. The normal leverage percentage with the mini lot is 1:40. For eg: $250 x 40 = $10,000 and since $10,000 is 1/10 of a standard forex hence for every 1 Pip in that you get you can earn a profit of $1. In the same manner every 1 pip that the market loses you lose $1.

Micro lots: Many brokers allow smaller or micro lots that one can use to do trading in 1:4 leverage.

$250 x 4 = $1,000 which is 1 / 10 of a ($10,000) mini lot

In simple words, it means that for every 1 pip that the forex makes you would earn 10 cents profit and lose the same amount for every 1 pip lost by the forex.

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