What is a Standard Lot
A standard lot is the equivalent to 100,000 units of the base currency in a forex trade. A standard lot is similar to trade size. It is one of the three commonly known lot sizes; the other two are mini-lot and micro-lot.
BREAKING DOWN Standard Lot
A standard lot represents 100,000 units of any currency, whereas a mini-lot represents 10,000 and a micro-lot represents 1,000 units of any currency. A one-pip movement for a standard lot corresponds with a $10 change. For example, if you buy $100,000 against the Japanese yen at a rate of ¥110.00 and the exchange rate moves to ¥110.50, which is a 50 pip movement, you have made $500. Conversely, if the exchange rate falls 50 pips to ¥109.50 your net profit and loss is minus $500.
With the advent of online brokers and increased competition it is possible for retail investors to make trades in amounts that aren't a standard lot, mini-lot, or micro-lot.
In the interbank market where banks trades with each other on platforms such as Reuters and EBS, the standard trading size, or standard lot, is 1 million units in the base currency.
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Micro-LoT
DEFINITION of Micro-Lot
A micro-lot is the equivalent to a contract for 1,000 units of the base currency in a forex trade. The base currency is the first currency in a pair or the currency that the investors buys or sells. Trading in micro-lots enables traders to trade in small increments.
BREAKING DOWN Micro-Lot
When an investor places an order for a micro lot, this means they have placed an order for 1,000 units of the currency being bought or sold. For example, in the EUR/USD currency pair, the euro is the base currency and the trader either buys or sells 1000 euro.
A micro-lot is the smallest unit of currency trading and is used by novice traders looking to start trading but who want to reduce the potential downside. Investors use micro-lot sizes when they prefer not to trade mini or standard lots. Ten mini lots are equal to 100 micro lots, which is equal to one standard lot.
Most retail brokerage accounts allow traders to trade micro-lots with minimal initial deposits.
