Wednesday, February 10, 2016

What is Lot?



In our previous articles, we’ve discussed some of the most encountered and complicated forex trading terms. Today, we’ll now discuss the term “lot” and how it is used in forex trading.

First of all, what does the term “lot” stands for? Lot refers to a bundle of units in trade. It talks about the size of the trade that you are making.

An accurate example of this is when you’re buying a pack of biscuit in a grocery store. A pack of biscuit contains 10 pieces of biscuits. Buying a pack of biscuit. If you’re buying a pack of biscuit, you are essentially buying 1 lot. It would be impossible for you to buy 5 pieces of biscuits, you have to buy them as a pack.

It would, however, be possible for you to buy more than 10 biscuits, but you have to buy them in multiples of 10. So, if you want to buy 20 pieces of biscuits, you have to buy 2 packs (lots) of biscuits to do so.

The pack of biscuit is an example of a lot. In the forex market, lot refers to how many units of currency are being involved in a trade.

In foreign exchange markets, the standard size for a lot is 100,000 units. There are also other types of lots – mini, micro and nano – which are 10,000, 1,000 and 100 units respectively.

When trading a micro lot, the smallest trade size you can make is always in multiples of 1,000. That means you can trade 1,000, 2,000, 3,000 units as long as it is in multiples of 1,000. Each 1,000 units is equivalent to 1 micro lot.

Familiarize yourself with more forex trading terms and learn “what is forex” by visiting our educational blogs. See who the best forex brokers are, visit Wibestbroker.com to find out! :)

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