Are you about to step into forex trading and find it challenging to comprehend the forex lot? If your answer is yes, there is no need to worry as we have come up with the solution.
Therefore, if you want to know about a lot and its link with pip, then delve straight into the article.
Lots can be defined as the particular amount in which the forex is traded. Moreover, we can say that a lot is regarded as a unit that measures the amount of transaction. In the forex trade, a standard lot is usually equal to the 100,0000 of a currency that it is based on.
It is also worth mentioning that on your trading platforms, the orders are usually placed in sizes that are quoted as lots.
Types of lot
As we have mentioned above, the standard lot size is 100,000, but apart from that there are some other types of lots that are min micro and nano, and they are equivalent to 10,000, 1,000 and 100 units, respectively.
Moreover, it is also notable to mention here that some brokers prefer to portray the quantity in lots. On the other hand, some like to go for actual currency units when it comes to showing.
Pip is related to the lots. Therefore, if you want to learn about the lots, then it is better to understand pips as well.
In the currency pair the change in the value of between two currencies is regatded as pip.
It is important to mention here that in the case of the yen pairs, the value of 1 pip is commonly equivalent to 0.01. On the other hand, for several other countries, the value of 1 pip is equal to 0.0001.
So, let’s suppose that a currency pair named EUR/USD opens at 1.385, and its closing is at 1.395. Then, the pips difference, in this case, will be 10.
Relation of pip and lot
Now, if you are wondering how it is related to the lots, then it is important to mention here that if you want to measure the loss or profit, then you must have to know all these values.
There are a lot of calculators online that can assist you in measuring the value. So, to avoid any human error, it is better to go for an authentic calculator. But have a look at the following method if you want to do it manually.
Let’s suppose you have to purchase a currency pair GBP/USD at 1.32140, and its closing value is 1.32250
In this case, the number of pips is equal to 11, and the value per pip is equivalent to 10USD.
Hence the lot size will be equal to the 1
Now, if you want to calculate the profit, then you will have to multiply all these values. So, your profit will be $110.
Well, that’s all about the lot. We are optimistic that this article must assist you in understanding a lot regarding the lot. Bear in mind that lot has huge importance in forex trading. Hence you must need to comprehend it in the best possible way. Moreover, it is always important to pick the right broker. If you want to go for xm com registration give it a read.