Lesson 4 of 74 minchecked
Lot size explained: from micro lots to standard lots
GoalAfter this lesson you can explain what a lot is and work out a simple position size for a trade.
A lot is the unit you use to measure trade size. This lesson explains micro, mini and standard lots in plain words.
A lot is a fixed bundle of units in a trade. In currency pairs, one standard lot usually means one hundred thousand units of the first currency. A mini lot is one tenth of that. A micro lot is one hundredth of a standard lot.
You do not need to trade a full standard lot. Many beginners start with micro lots because each price move changes the account balance by a smaller amount.
The lot size you choose changes how much money is at risk on each trade. A larger lot makes every price move matter more.
Lots in currency pairs
For currency pairs, the value of one pip depends on the lot size. With a micro lot, one pip is usually a very small amount. With a standard lot, the same pip move is much larger.
To find your lot size, first decide how much you are willing to lose on the trade. Then measure the distance from your entry to your stop in pips. Divide the money at risk by the pip value for your lot.
A lot size calculator does this maths for you. You can find one online, in a spreadsheet, or inside a trading platform. The idea is the same: risk amount divided by pip value gives your lot size.
Lots in gold and other markets
Gold is often quoted in ounces. One standard lot of gold usually means one hundred ounces. A micro lot is one hundredth of that, so one ounce.
Gold moves in larger price steps than many currency pairs. A small lot size can still carry meaningful risk. Check the contract size before you calculate.
A gold lot size calculator uses the same logic. You enter the money at risk and the stop distance. It returns a lot size that fits your plan.
Using a calculator well
A lot size calculator needs three inputs: account balance, risk per trade, and stop distance. Use a risk per trade you can accept if the trade loses.
Platform tools and spreadsheet templates can do the sum. The calculator does not choose the trade for you. It only turns your risk plan into a lot size.
Always check the contract size for the market you trade. Currency pairs, gold and other markets can have different lot definitions.
Many beginners pick a lot size because it looks small, then skip the stop distance. Always work out the money at risk first, then let that decide the lot size.
Words with a dotted underline open their explanation in the glossary.
Check your understanding
Answer in your head first, then open the answer.
How many units are in one standard lot of a currency pair?
AnswerOne standard lot usually means one hundred thousand units of the first currency. A micro lot is one hundredth of that.
What three inputs does a simple lot size calculator need?
AnswerIt needs your account balance, the risk per trade, and the stop distance in pips. From these it returns a lot size.
Why is lot size important for risk?
AnswerLot size sets how much each price move changes your account. A larger lot means more money is at risk on the same move.