For the mid-experienced and professional investors, ‘’lot’’ is a popular term used in the Forex industry. The new investors and traders may confuse at the beginning and they start asking questions such as What is a lot in Forex? How much is 1 lot? What is a micro-lot? In this article, we would like to talk about the lots in forex in detail and how to calculate lots. We will also explain topics such as what are the lot types, what the lot sizes of the commodities are equal to?
What Does Lot Mean?
Lot is one of the terms used to describe the transaction size. The size of the transactions opened in the Forex market is determined by lot. Therefore, we need to know how many transactions we need to open and how much margin we need to have in lot calculation.
How Much Is 1 Lot?
For the Forex market, 1 lot represents a size of 100,000 units. In other words, when you buy 1 lot, you are purchasing 100,000 units from the currency unit on the left of the relevant pair.
For example; If you buy 1 lot in USDEUR parity, you will have made a purchase of $100,000. At this point, leverage also comes into the game. If you use 100 leverage, you can do this for 100,000 / 100 = $1000. If you use 500 leverage, you can do this for 100,000 / 500 = 200.
If we are asked what 1 lot is now, we can say that it is 100,000 units for parities. Some investors think of questions such as how many dollars are there in 1 lot and how many EUR are there in 1 lot?
Let’s look at the answers to these questions step by step.
How much is 1 lot? In USD-based transactions, we can express 1 lot in dollars. For example, in the USDEUR transaction, 1 lot equals $100,000 and if you use 200 leverage, you can open trade of 1 lot for a deposit of 500 dollars.
There Are 4 Main Types of Lots: Standard lot, Mini Lot, Micro Lot, Nano Lot
What Is a Standard Lot in Forex?
In a standard lot, 1 lot is equal to the volume of 100,000 units.
What Is a Mini Lot in Forex?
A size of 10,000 units, which corresponds to 10 per cent of the size of the lot in the Forex market, is called a mini lot. When you open a 0.1 lot trade, you open 1 mini lot. For example, for 1 mini lot EURUSD transaction, you enter a transaction of 10,000 Euros.
What Is a Micro Lot in Forex?
A size of 1000 units that corresponds to 1 per cent of the lot is called a micro lot. It is generally thought of as what is 0.01 lot. However, the name of this lot type is a micro lot. A 0.01 lot transaction is called 1 micro lot.
What is Nano Lot?
Some forex companies also have account types called nano accounts. You can use collaterals such as $5-10 in nano account types, also called Cent accounts.
The purpose of nano accounts can be to test the company, develop new trading strategies, or test the forex robot. Nano-accounts are used to get a real test by risking very low amounts.
So what does nano lot mean? 1 nano lot corresponds to a size of 100 units. In this case, you need $100 for 1 nano lot USDEUR transaction, and if you are using 100 leverage, you can trade 1 nano lot USDEUR with a $1 guarantee.
How to Calculate Lot Size in Forex?
When you open 1 lot trade in Forex markets, the size of your position is 100,000 units. When you select 1.00 from the volume or volume section and write “buy”, if the parity is at 1.20 at that moment, you need a $100.000 x 1.20 = $120.000 guarantee. Of course, this is the case where leverage is 1:1. If you are using 1:100 leverage, a deposit of 120,000/100 = $1,200 is enough for you to open a 1 lot trade.
Each investor should determine the volume of transactions according to their own risk perception because the higher the lot, the higher the profit/loss from transactions. It is possible to perform transactions under 1 lot. Various lot types have been created for this, as we mentioned above; there are lot types such as mini lot, micro lot, nano lot.
If we open a transaction of 1 mini lot on EURUSD parity, that is, if we open a transaction of 0.1 lots;
10,000 X 1.20 = $12,000 deposit required. With the leverage of 1:100, I can open a mini-lot trade with a $120 collateral.
If we open a transaction of 1 micro lot on EURUSD parity;
1 micro lot corresponds to 1/100 of the lot as we give, ie 1000 units.
While the collateral to be given with 1:1 leverage is $1000 X 1.20 = $1200, at 1:100 leverage, we can enter a 1 micro lot transaction with 12 dollars of collateral.
How Much Is 1 Lot for Commodities?
We said that for currency pairs, 1 lot generally corresponds to a size of 100,000 units. So what does 1 lot mean for commodities such as gold, silver, oil?
Gold is usually expressed in XAU. In Forex, X is used for precious metals, followed by the symbol for gold, AU. 1 lot of gold, ie 1 lot of XAUUSD, corresponds to the size of 100 ounces. 1 ounce comes in 31.10 grams. 1 lot of silver corresponds to a size of 5000 ounces. For oil commodities, 1 lot of oil corresponds to 100 barrels. For natural gas, 1 lot makes 100,000 cubic meters.
How Much Is 1 Lot in Stock Trading?
The stocks of companies are bought and sold on the stock exchange. The term lot is also used to indicate the number of stocks. In stocks, 1 lot equals 1 stock.
Let’s say that if you want to buy 100 lots of stock of which 1 is $5, you have to give $500 because you will buy 100 shares. Of course, since the commission of the brokerage houses will be involved, there will also be a commission per transaction.
SEE ALSO: What Is Margin in Forex Trading?