Education

# Understanding lots and pips

By LonghornFX Technical Analysis
Aug 10, 20202 min

## Understanding Lots in CFD Trading

When trading CFDs, position sizes are based on ‘lots’. A ‘lot’ is the standard number of units of the underlying asset which is being traded. Lots vary depending on the markets that a trader wishes to be involved in.

The value of a lot is set out by the broker and is the minimum number of units that you can buy of any given financial instrument.

You can check the number of units within MT4 by:

• Right clicking on the instrument within the ‘Market Watch’

• Go to ‘Specification’

• See ‘Contract Size’

A lot refers to any financial instrument or tradeable asset on the xxxxx platform, however, the ultimate size and value of a lot will vary between markets.

Micro lot trading allows traders on LonghornFX to trade with a fraction of the contract size also known as micro lots which start at 0.01.  The maximum lot size at xxxx is 1,000.

The standard contract size for assets in units:

• Forex    100,000

• Metals   5,000

• Oil         1,000

• Stocks   100

• Crypto   10

What is 1 Lot in Forex and how does leverage impact its calculation?

If we use AUD/USD currency pair as a case study, this instrument would contain a contract size of 100,000 units.

1 lot would be equal to \$100,000

By using a leverage setting of 1:500 a trader would need \$200 in their account to open a position. This is calculated as follows:

100,000 contract size  / 500 leverage = \$200 required balance to trade 1 lot

If we were to lower the leverage setting to 1:100 for the same pair AUD/USD the calculation would change:

100,000 / 100 = \$1,000 required balance to trade 1 lot

Lot Size

Units of
Base Currency

Volume

Pip Value
(base: USD)

1 Standard Lot

100,000 units

1.1

1 pip = \$10

1 Mini Lot

10,000 units

0.1

1 pip = \$1

1 Micro Lot

1,000 units

0.01

1 pip = \$0.10

1 Nano Lot

100 units

0.001

1 pip = \$0.01

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