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Chapter 5, Part IV. Spread, Lots, Leverage/margin and profit/loss – joining all... Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    LOT TYPES

    Commander in Pips: Excellent! And what does “Lot size” mean? What kinds of Lot types are you familiar with?

    Pipruit: Lot size shows how much Base currency will be traded in terms of units. First, we should look at the base currency of any pair; let’s suppose that this is EUR/USD. Then we should take a look at Lot size. If Lot, for example, equals 100 000, then it means that we will trade 100 000 EUR for USD whatever amount of USD needed will be.​

    Commander in Pips: And what amount of USD will that be?

    Pipruit: This, in turn, depends on the exchange rate. Say, EUR/USD=1.32 shows, how many units of Quote currency I will have to pay or get for one unit of base currency, depending on direction of trade. In this case for each EUR I will pay or get 1.32 USD. Returning to our associating of Base currency with Item and Quote currency with money – how much should I pay in USD for every 1 EUR I buy, or how much I will get in USD for every 1 EUR that I sell.​

    Commander in Pips: That’s right – the rate shows the price of Base currency in terms of Quote currency. So, what types of lots are commonly used on the forex market?

    Pipruit: Ok –

    1. Standard lot = 100 000 units of Base currency;

    2. Mini Lot = 0.1 of Standard Lot = 10 000 units of Base currency;

    3. Micro Lot = 0.01 of Standard Lot = 1000 units of Base currency;

    4. Other lower Lots, sometimes it calls as “Nano Lots” = 0.001 of Standard lot = 100 units of base currency;

    5. Free lot size – some brokers allow to choose any lot size by the client at wish.​

    Commander in Pips: Good, I see you’ve done well, with this material.
     
    Nachoga and fran alvarez like this.
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