Lot Size (Standard)
In forex, lot size is the way platforms standardise trade size. A standard lot is typically 100,000 units of the base currency.
In plain English: "A lot is just a standard 'bundle size' for trading."
Lot size is one of the most important risk drivers. A small change in lots can massively change your P&L per pip.
What Is a Standard Lot?
In spot forex, lot sizes are commonly defined as:
| Lot type | Typical size | How it's displayed |
|---|---|---|
| Standard lot | 100,000 units | 1.0 lot |
| Mini lot | 10,000 units | 0.1 lot |
| Micro lot | 1,000 units | 0.01 lot |
| Nano lot | 100 units | 0.001 lot |
Not every broker offers nano lots. Some platforms also allow "units" trading instead of lots.
⚠️ CFD Note
On CFDs, "1 lot" may represent a different contract size (e.g., 1 contract, 10 contracts, or a notional amount). Always check the instrument specification.
Lot Size and Pip Value
Lot size directly affects how much money you make or lose per pip. Bigger lot = bigger pip value.
- Small lot size: smaller P&L swings per pip.
- Large lot size: larger P&L swings per pip (and faster drawdowns).
💡 Simple Illustration
If your platform shows that 1 pip is worth £1 at 0.10 lots, then at 1.00 lots (10× larger size), 1 pip is roughly worth £10 (ignoring conversion differences).
⚠️ Key Takeaway
Don't focus on "how many lots you traded". Focus on how much you risked if the stop-loss hits.
Lot Size and Margin Requirements
In leveraged products, lot size also changes your margin requirement. Larger positions require more margin and can lead to faster margin calls if the market moves against you.
- Bigger lot size → larger notional exposure → higher margin required.
- Higher leverage → lower margin required per unit, but risk remains high.
⚠️ Important Risk Note
Leverage can magnify losses. Even a small market move can become a large percentage loss if your lot size is too big for your account.
Examples: Standard Lot in Practice
Example 1: EUR/USD position size
You buy 1.0 lot of EUR/USD. That typically equals 100,000 EUR notional.
Example 2: Scaling lot size
You trade the same setup with:
- 0.10 lots (mini-lot equivalent)
- 1.00 lots (standard lot)
Your pip value (and risk) is roughly 10× higher at 1.00 lots than at 0.10 lots.
Example 3: Stop-loss risk
If your stop-loss is 25 pips away, your total £ risk is: pip value × 25 (plus spread/fees).
How to Choose the Right Lot Size
A practical approach for beginners:
- Decide how much money you are willing to lose per trade (e.g., 1% of your account).
- Set your stop-loss distance (in pips/points).
- Use the platform's calculator/order ticket to find the lot size that matches that risk.
⚠️ Beginner-Friendly Rule
If you can't explain your £ risk on the trade in one sentence, your position size is probably too big or not planned properly.
Common Misconceptions
- "Lots are only for forex."
Lots are common in forex, but the idea of a standard contract size exists in futures and CFDs too. - "I'll use a big lot and a tight stop."
Tight stops can be hit by normal volatility. Oversizing makes this expensive quickly. - "High leverage means I can safely trade bigger."
Leverage reduces margin, not risk. Risk comes from position size and market movement.
✅ Quick Checkpoint
Try answering before expanding the model answers.
1) What is a standard lot in spot forex?
Typically 100,000 units of the base currency.
2) If you increase lot size, what happens to pip value?
Pip value increases (bigger profit/loss per pip).
3) What is the best way to choose a lot size?
Choose lot size based on your planned £ risk and stop-loss distance, not on "how many lots" sounds good.
Next lesson: Mini lot.
Frequently Asked Questions: Standard Lots
Is 1 lot always 100,000 units?
In spot forex, a standard lot is commonly 100,000 units. But on CFDs and some instruments, "1 lot" can represent a different contract size. Always check the instrument specification on your platform.
Can I trade less than 0.01 lots?
Some brokers offer nano lots (0.001) or "units" trading. Availability varies by broker and platform.
Why do lots exist?
Lots standardise trade sizes and make it easier to quote pip values, margin requirements, and risk across different positions.
What is the safest lot size for beginners?
There is no universal "safe" size. The safer approach is risk-based sizing: keep your £ risk per trade small and consistent, and choose the lot size that matches your stop distance.
Summary
A standard lot in spot forex is typically 100,000 units of the base currency. Lot size directly affects pip value, risk, and margin. Choose lot size based on planned £ risk and stop-loss distance, not guesswork.
Next lesson: Mini lot.