Forex definition
Forex
A lot is the typical unit amount of currency traded in forex and equals 100,000 units of whichever specific currency is quoted. Lot sizes are so large in order to magnify the changes in currency values, which usually occur in a matter of only a few pips.
For example, if the USD/JPY is trading at 119.80, a single pip change would amount in $8.34 difference when multiplied against a single lot. The math is: (.01/119.80) x 100,000 = $8.34
What are lot sizes in forex?
While a typical lot represents 100,000 units of a given currency, they can be reduced for traders looking to trade smaller amounts of currency. The names and unit sizes are as follows:
- Standard Lot – 100,000
- Mini Lot – 10,000
- Micro Lot – 1,000
- Nano Lot – 100