In forex, you do not buy a share or a contract in the conventional sense. You trade lots — standardised units of the base currency that determine the size of your position. The lot size you choose directly determines your pip value, which determines your profit or loss per pip, which determines how much you make or lose on every trade. This is the lever that controls your risk more than any other single variable.
What Is a Lot?
A lot is a standardised unit of measurement for trade size. Rather than specifying that you want to buy 47,832 euros, you specify that you want to buy 0.5 lots — which your platform converts to units automatically. This standardisation makes risk calculation consistent and comparable across different brokers and different pairs.
Standard Lots
One standard lot equals 100,000 units of the base currency. On EUR/USD, one standard lot means you are buying or selling 100,000 euros. At the current exchange rate of approximately 1.0850, that position has a notional value of approximately $108,500.
Lot size: 1.00 (100,000 units) Pip value: $10.00 Stop loss of 50 pips = $500 risk Stop loss of 20 pips = $200 risk Stop loss of 100 pips = $1,000 risk
Standard lots are appropriate for accounts with sufficient capital to absorb normal market fluctuations — typically $10,000 or more, depending on how far your stop losses are placed. Trading standard lots on a $1,000 account means a 50-pip stop loss risks 50% of your account on a single trade. This is not risk management — it is gambling.
Mini Lots
One mini lot equals 10,000 units of the base currency — one tenth of a standard lot. In MT4 and MT5, mini lots are entered as 0.10 in the volume field.
Lot size: 0.10 (10,000 units) Pip value: $1.00 Stop loss of 50 pips = $50 risk Stop loss of 20 pips = $20 risk Stop loss of 100 pips = $100 risk
Mini lots are suitable for accounts in the $1,000 to $5,000 range — though correct lot size should always be calculated from your risk percentage and stop distance rather than arbitrarily chosen based on account size alone. A $2,000 account risking 2% per trade can risk $40 per trade — which at 0.10 lots means a 40-pip stop loss is the maximum viable distance.
Micro Lots
One micro lot equals 1,000 units — one hundredth of a standard lot. In MT4 and MT5, micro lots are entered as 0.01. The pip value is $0.10 — meaning a 100-pip move in your favour gains you $10, and a 100-pip move against you loses you $10.
Lot size: 0.01 (1,000 units) Pip value: $0.10 Stop loss of 50 pips = $5 risk Stop loss of 100 pips = $10 risk Stop loss of 200 pips = $20 risk
Micro lots are appropriate for accounts under $1,000 or for beginners making the transition from demo to live trading and wanting to minimise dollar exposure while learning. They are also useful for testing new strategies on a live account with minimal capital at risk.
Nano Lots
Some brokers offer nano lots — 100 units, or 0.001 in MT4 volume. The pip value is $0.01. Nano lots are not universally available and are primarily useful for cent accounts or extremely small capital. They are not commonly used by developing retail traders and are included here only for completeness.
Choosing the Right Lot Size
The correct lot size for any trade is never chosen arbitrarily — it is calculated from three inputs: your account balance, your maximum risk percentage per trade, and your stop loss distance in pips. This calculation is covered in full in Course 11 — Head of Trading. Use our free Position Size Calculator until then.
The general framework: risk no more than 1 to 2 percent of your account on any single trade. With a $1,000 account risking 2%, your maximum loss per trade is $20. If your stop loss is 50 pips and your pip value at 0.01 lots is $0.10, you can risk 500 pips at 0.01 lots before hitting $50. But you only want to risk $20, so your stop loss should be 200 pips at 0.01 lots, or 100 pips at 0.02 lots — the math defines the lot size, not intuition.