Lot Size

Lot size is the unit of trade volume in forex, standardised so that a standard lot equals 100,000 units of the base currency, a mini lot 10,000, and a micro lot 1,000 (some brokers also offer nano lots of 100). Because pip value scales directly with lot size, your choice of lot directly determines how many dollars you gain or lose per pip and thus the cash risk of the trade. Proper position sizing works backwards: you decide the cash you are willing to risk and your stop distance in pips, then pick the lot size that fits — rather than picking a lot size and hoping. Oversized lots relative to account size are a leading cause of margin calls, because they consume margin fast and turn small adverse moves into large dollar losses.

In plain English — Lot size is how trade quantity is measured in forex. One standard lot is 100,000 units of the base currency; a mini lot is 10,000 units; a micro lot is 1,000 units. The lot size sets how much each pip is worth and therefore how much money is at stake per move. Choosing the right lot size is the core of position sizing — it is how you control the cash risk of a trade.

On EUR/USD, one pip is worth about $10 on a standard lot, $1 on a mini lot, and $0.10 on a micro lot. If your plan risks $50 on a 25-pip stop, a mini lot ($1/pip = $25 risk) or two ($50 risk) fits better than a standard lot ($250 risk).