Lot represents the size of your trades in Forex. In another interpretation, Lot is the number of currency units you will trade in Forex.
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I t is important to know your trade volume because it affects your trading strategies and your profits. Meanwhile, 1 lot of Natural Gas is quantified by , cubic meters. Those statistics are not written in stone but can change depending on the broker.
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Therefore, you should obtain information about commodities from the broker you trade with, to get the best understanding. In short, it is important to know your trade volume because it affects your trading strategies and your profits. A bigger lot may bring you greater risks, which means that you can see big profits or big losses, and smaller lot such as nano lot or mini lot are often suitable for beginner traders who are more comfortable trading with smaller sizes and lower risk.
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What is a Lot in Forex? -
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In contrary to the Mini Lots that refer to 10, units, traders are welcome to trade 1, units or 0.
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We need to calculate the Pip Value so we can estimate our profits or losses from our trading. The simplest way to calculate the Pip Value is to first use the Standard Lots. You will then have to adjust your calculations so you can find the Pip Value on Mini Lots, Micro Lots or any other Lot size you wish to trade.
Our calculations in this sector are when your Base currency is the USD. We will provide three different examples. USD quote currency of the currency pair.
The Pip Value is calculated as below:. USD base currency of the currency pair. We approximated because the exchange rate changes, so does the value of each pip. Because the value changes in the quote currency times the exchange rate ratio as. EUR base currency of the currency pair. The Pip Value is calculated as below. From our example before, we know that the value is 6. You are probably wondering how can I trade with Lot sizes of , base units or even 1, base units.
Lots, Pips and Spreads
Well, the answer is very simple. This is available to you from the leverage you have in your account. As for any losses or gains these will be deducted or added to the remaining balance in your account. However, you need to take into consideration your Margin requirements as well as the risks associated with higher leverages.