Trading lot on the Forex market
is one of the basic elements of any trading position. Forming a trading strategy and money management system is almost impossible without taking into account the lot size of opened trading orders.
Many beginners and experienced traders ask the following questions: “ What is a trading lot in Forex?
", "
How to calculate a lot in trading?
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What are the sizes of trading lots in financial markets?
"We'll look at them later in the article.
✅ Understanding the lot calculation rules for opening and closing positions is of paramount importance in money management
and
dealing with risks
in financial markets.
Often it is the ability to properly manage capital that allows experienced traders to receive stable and higher incomes
than novice traders.
| ✍ It is important to note that trading and trading in financial markets does not guarantee profit and is always associated with the risk of complete or partial loss of invested capital. |
It's also worth mentioning that this article is not about strategies that will help you become a great trader (although there are links at the end of the article
for some of them).
The purpose of this article is to give you a clear understanding of what a Forex and CFD lot
and how to calculate it.
What is a Forex lot?
Lot
(from the English “lot”)
is a unit of position volume that a trader is going to bring to the market
. A Forex lot is the size of a financial contract used in trading on the foreign exchange market.
What is a lot on the stock exchange?
This is the size of the financial contract used when trading on the exchange market.
Number of lots
(or “
lot
”) determines the amount of change in the trader’s capital when quotes change by one tick. All other things being equal, the higher the lot size of the transaction, the greater the profit it can bring to the trader. It is important to remember that in this situation the trader also bears an increased risk of losing capital if the market moves against him.
In this article, we will look at three types of lots in financial markets:
1️⃣ Standard Forex lot.
2️⃣ Mini-lot Forex.
3️⃣ Microlot Forex.
Later in the article we will give a detailed definition of each of these concepts.
It is important to note that the lot size will differ depending on what instrument you are trading: currency pairs, CFD contracts on stock indices, shares or commodities. We will also look at these later in the article.
Convenient lot calculation, as well as additional tools for analysis and trading, are presented in the trading platforms MetaTrader 4 (detailed guide to MetaTrader 4) and MetaTrader 5 (detailed guide to MetaTrader 5).
✅ In addition, you can install our exclusive MetaTrader Supreme Edition plugin for the MT4 and MT5 platforms mentioned above.
Why combine assets into lots?
We have already partially answered this question in the first section, but let’s look at a specific example. Let's take VTB shares for analysis. Here on the screen of placing a simple order they tell us that one VTB lot is 10,000 shares.
When placing a simple order, the number of lots is indicated (using VTB as an example)
But let’s imagine that one lot = 1, and the share itself, according to quotes on the Moscow Exchange, costs 0.047770 rubles. This is approximately 4.8 kopecks. We wanted to buy a certain number of VTB shares for 1,000,000 rubles.
1,000,000/0.047770=20,933,640 shares
Can you imagine how inconvenient this is, neither for us, nor for the broker, nor for anyone!! And if you buy or sell in lots, then the figure will be without these crazy zeros.
20,933,640/1000=20,934 lots
The difference is significant: 20 million or 20 thousand. Do you feel it?
How to calculate a Forex lot?
To quickly and correctly calculate the lot size on Forex, you can use the Forex lot calculator from Admirals and get the correct value in just a few clicks.
| ✍ Forex position size calculator – an indispensable tool for your trading. It is extremely easy to use and very useful when used correctly. |
The pictures below show an example of how the value of 1 lot on Forex is automatically calculated.
How to calculate a lot on Forex with the Admiral Markets calculator:
✔️ In the “ Tool”
» enter the trading instrument you are interested in. In the example below, this is the EURUSD currency pair.
✔️ In the “ Lot”
» indicate the size of the position that interests you. The example shows the value “0.5 lot”. To calculate the value of one lot, enter “1”.
✔️ In the “ Leverage” column
» set the value of the leverage you are interested in.
✔️ In the “ Account currency”
» indicate the currency of your trading account.
✔️ Next, click on the “ Calculate”
«.
Once the calculation is completed, the Forex position size will automatically appear in the Contract Size line. The value of the Forex position in this example is 50,000 euros.
The contract size is not equivalent to the margin requirements you need to open a buy or sell trade on the selected asset. Margin requirements also depend on the amount of leverage.
| ✅ To find out the value of margin requirements, find the column “ |
With a trading calculator you can calculate different lot sizes in Forex. Let's look at another example:
Contract size
=
Number of lots
*
Size of 1 lot
2 lots EUR/USD: 2 * 100,000 EUR = 200,000 EUR
Watch the video
