In forex, position size is measured in lots. A lot is a fixed number of units of the base currency.
| Lot type | Units of base currency | Volume in most platforms |
|---|---|---|
| Standard lot | 100,000 | 1.00 |
| Mini lot | 10,000 | 0.10 |
| Micro lot | 1,000 | 0.01 |
| Nano lot | 100 | 0.001 (only some brokers) |
So buying 0.25 lots of EUR/USD means buying 25,000 euros’ worth against the dollar.
Lot size decides what each pip is worth
For pairs quoted in US dollars, every 0.01 lots is worth roughly 10 cents per pip:
- 1.00 lot: about $10 per pip
- 0.10 lot: about $1 per pip
- 0.01 lot: about $0.10 per pip
For other pairs the value changes with the exchange rate. Use the pip calculator to check.
Choosing a lot size the right way
The most common beginner mistake is picking a lot size because it “feels right” and then setting a stop loss. Flip it around:
- Decide your risk per trade as a percentage of your account. Many traders use 0.5% to 2%.
- Find the stop-loss distance in pips, from the signal or your own analysis.
- Calculate the lot size so a stop-out loses exactly that amount.
Lot size = (account × risk %) ÷ (stop in pips × pip value per lot)
Example: a $5,000 account risking 1% ($50) on a EUR/USD trade with a 25-pip stop. The pip value is $10 per standard lot, so lot size = 50 ÷ (25 × 10) = 0.20 lots.
The lot size calculator does this for any pair and account currency.
Why this matters
Fixed-percentage sizing means a wide stop automatically gets a smaller position and a tight stop a larger one, so every trade risks the same amount. A run of losses then shrinks your account slowly instead of wiping it out. The drawdown calculator shows why this matters: after a 50% loss you need a 100% gain just to get back to where you started.
Margin is a separate question
Lot size also decides how much margin your broker locks up to keep the trade open. That depends on your leverage. A 1.00 lot EUR/USD position at 1:30 leverage needs much more margin than at 1:500, but the profit and loss per pip is identical. Leverage changes how much capital is tied up, not how much you make or lose per pip. See leverage and margin explained and the margin calculator.