What Is A Lot in Forex Trading? Which Lot Size Is Better for Beginners?

When you first get your feet wet with forex training, you are bound to come across the term “lot” time and again. A lot is a method of determining how many currency units are required for a trade. Given the notable exchange rate swings that often occur in the currency market, assigning and using suitable lot sizes in forex trading risk management plans is essential.

Because the lot size directly influences the risk you're taking, it's the first thing you need to understand fully, before identifying your entry or exit points. In this article, we will explain what a forex lot is and which forex lot sizes are most common for trading beginners.

What Is A Lot in Forex

Lot represents the size of your trades in Forex. In another interpretation, Lot is the number of currency units you will trade in Forex. The lot size you are trading with has a direct impact on how much a move in the market affects your trading account. A bigger lot may generate big profits, but also big losses. Therefore, your trade volume has an effect on your trading strategies and your management of risk. There are typically 4 forex lot sizes that you will come across when trading forex.

1. Standard Lot

This size is what you will see most commonly when trading with the standard account types of many forex brokers. A standard lot corresponds to 100,000 units of the base currency in a quote of currency pairs. 

For example, if your account is funded in U.S. dollars, a standard lot is a $100,000 trade. Trading with this size of position means that the trader's account value will fluctuate by $10 for each one pip move.

Assume you want to buy a standard lot of USD/EUR and the exchange rate is 1.24, meaning you will purchase $100,000 with €124 000.

The majority of experienced forex traders are accustomed to trading at this level and it is worth noting that due to leverage in forex, you do not need to have a full $100,000 in your account to trade a standard lot. When most refer to a lot in forex trading, this is also the typical value they are referring to.

2. Mini Lot

A mini lot is equal to 10,000 units, which is 10% of a standard lot. Hence, when a trader opens an order of 0.1 lots, he is trading 1 mini lot. If you are using a dollar-based account and trading a dollar-based pair, each pip in your trade would be worth about $1.00.

It is a great choice for those forex traders who may want to trade with a lower, or perhaps no leverage at all. If you are a beginner and you want to start trading using mini lots, make sure that you're well-capitalized.

3. Micro Lot

A micro lot is equal to 1000 units, which is 1% of a standard lot. Therefore, when you open a trade with a 0.01 lot, you will trade 1 micro lot. If you are trading a dollar-based pair, 1 pip would be equal to 10 cents.

Micro lots are the smallest tradable lot available to most brokers and are a good starting point for beginners. Micro lots are very good for beginners that want to keep risk to a minimum while practicing their trading.

4. Nano lot

The smallest trading lot size available is the nano lot. A nano lot is equal to 100 units, which is 0.1% of a standard lot. Opening trade with a 0.001 lot means you will trade 1 nano lot.

The nano lot is again more rare to see, but is certainly still available with many top forex trading brokers. It could be a safe starting lot size for a novice trader who wants to try his hand at forex training or for a trader who wants to test a new trading strategy. It offers real money trading beyond a demo trading account, but with a much smaller level of risk involved.

Which Lot Size Is Better for Forex Beginners

For a beginner, it is to go with small lot sizes. This is safe for even the experienced trader. Because bad money management doesn't spare even someone who is not a beginner. Beginner traders are often advised to trade with mini, micro or nano lots in order to avoid the risk of huge losses.

Also keep in mind that not all lot sizes are made available to all trading account types by online brokers, so make sure that a broker you are considering using will provide you with the lot size you are most interested in trading given the amount of money you have available to deposit in your trading account.

As the demand for micro accounts when trading forex is particularly high with new traders, we will give you a list of top regulated brokers that offer accounts to make micro trades:

Broker	Detail	More Information
	Founded: 1999 Headquarters: United State Min deposit: 100 USD Max Lev: 1 : 200	Forex.com Review
	Founded: 2000 Headquarters: Switzerland Min deposit: 100 USD Max Lev: 1 : 100	Swissquote Review
	Founded: 2009 Headquarters: Limassol Min deposit: 5 USD Max Lev: 1 : 888	XM Review
	Founded: 1998 Headquarters: Switzerland Min deposit: 1000 USD Max Lev: 1 : 200	Dukascopy Review
	Founded: 1999 Headquarters: London Min deposit: 50 USD Max Lev: 1 : 400	FXCM Review
	Founded: 2008 Headquarters: Limassol Min deposit: 1 USD Max Lev: 1 : 2000	Exness Review
	Founded: 2010 Headquarters: Melbourne Min deposit: 200 ‎AUD Max Lev: 1 : 500	Pepperstone Review
	Founded: 2011 Headquarters: Limassol Min deposit: 10 USD Max Lev: 1 : 2000	FXTM Review
	Founded: 2010 Headquarters: London Min deposit: 10000 USD Max Lev: 1 : 30	LMAX Review
	Founded: 2006 Headquarters: Dublin, Ireland Min deposit: 100 USD Max Lev: 1 : 400	Avatrade Review

Conclusion

In order for a trader to effectively manage risk and other related specifics, such as an appropriate degree of leverage for their trading account, determining the proper lot size to trade can be of utmost importance, almost as important as deciding which direction you should take a position in.

The forex lot size that works well for you is really dependent on a number of factors based on how you want to trade. The beginners should start to trade forex in micro-lots size or mini lot size. After you gain experience and confidence, you can pass to the next level.