LOT SIZE IN FOREX TRADING
you must understand lot size and you must know how is you will determine that what each PIP you earn is worth.
when you placed an order it means you traded little currency blocks these little blocks are called “Lots”.
It is a certain size of currency traded, certain dollar amount.
Now I will briefly discuss in this article so Let’s start….
THREE BASIC LOT SIZE.
So as you know that there are two basic account type in Forex.
One is Mini and another is Standard account if we have mini account.
So what will be the volume in these three basic lot size and keep in mind.
that I am just educating you only currencies not others like commodities, stock, bound and indices
THREE BASIC LOT SIZE.
Micro Lot = $1000 worth of currency controlled and volume 0.10 lot and it will be equal to $0.10 per pip
Mini Lot = $10,000 worth of currency controlled and volume 1 lot and it will be equal to $1 per pip
Standard Lot = $100,000 worth of currency controlled and volume 10 lot and it will be equal to $10 per pip
like that in below for GBP/USD.
How many lots are worth in the GBP/USD.
1 Micro lot = $0.10 per PIP.
1 Mini lot = $1 per PIP.
Standard lot = $10 per PIP.
WHAT IS MARGIN
- How much you need to “Put up”.
- The Margin is like a Security Deposit.
- The margin is multiplied with leverage to get lot Size.
- hence Margin is actual money that is in your account.
- Your broker will take the margin and segregate it during the trade, you will get it back if you lose or win.
WHAT IS LEVERAGE
- Because market moves in such small amounts, we need to magnify the trade sizes.
- Leverage is the trade size “multiplier”.
- Your broker “lend” you additional capital, although no money changes hands.
- almost any Brokers can offer the wide range of leverage, anywhere from 1:1 to 2000:1
Formulas of Leverage, Lot Size, and Margin
- find Margin = Contract / Leverage.
- To find Contract = Margin X Leverage.
- The find Leverage = Contract / Margin.
- Margin Level = Equity / Margin * 100
- Leverage = 1:500 M=$10,000 / 500 =$20
- Lot Size = $ 10,000 LS=$20 X 500 = $10,000
- Margin = ???? L = $10,000 / $20 = 500
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