Length : 3.00 Minutes
Trade Size Measurement
Now that you know the basics of forex, we will move on to some of the technical terms that you need to know in order to start your trading journey.
First we start discussing on how we measure a trade size in forex.
What is a “Lot”?
Lot is the measurement for the units of currency you buy and sell.
A standard lot represents 100,000 units of any currency, whereas a mini-lot represents 10,000 and a micro-lot represents 1,000 units of any currency.
Let’s assume, you open a one-lot position, then your trade size equals to 100,000 units of base currency. Now in order to calculate the value of each units of currency that you are trading, whether be a sell or a buy, in order to calculate the total value of your one lot trade, you need to know the “Pip” value.
The change in a currency value relative to another is measured in “pips,” and the impact of the pip value on your capital is related to the amounts of lot that you trade.
For example, a one-pip movement for a standard lot corresponds with a $10 change. Whereas, one pip movement for a mini and micro lot is $1 and $0.1
(More on the “pip” and its value calculation on the next topics.)