What Is Lots In Forex Trading

As a beginner to Forex trading, you may find yourself confused about the term lots. In Forex, the currencies are traded in lots. 

The standard size for a lot is 100,000 units. The unit is the base currency that is being traded. The best way to understand how this occurs is to look at an example.

If you are using the cross USD/CHF, for example, the base currency here is the USD. This means that the trade may be one standard lot of USD/CHF, which would be worth $100,000. 

Consider another example of this. If you were using the cross GBP/USD, then the base currency here is the GBP. This means that one lot would be worth 100,000 pounds.

However, it is also important to note that not all of the lots traded in Forex are for standard lots. In fact, many of the trades that occur are for different amounts. The same principle and set up still applies, though. You can trade by a two of three types of lots that you can trade by, or sizes. The standard lot, as mentioned, is 100,000 units of the base currency. A mini lot is equal to 10,000 units of the base currency. Then there are also micro lots, which are equal to 1,000 units of the base currency.

As you get started in Forex trading, do note that the type of account you have plays a role in the lots that you can purchase. Those who open mini accounts will have access to mini and micro lots. These are people that open the account with any place between $200 and $1000. Those who want to trade in standard lot sizes will need to open a larger account only. Also, note that the size requirements for opening a standard account will change based on the broker that you are working with.