Forex Lot Size Definition: Standard vs Micro
Lot sizes are an important but often misunderstood concept for anyone starting out in Forex trading. Essentially, a lot size determines how much of a currency pair you're buying or selling with each trade.
Standard lots are the normal unit of trading in Forex. Micro lots, on the other hand, are a fraction of a standard lot.
Understanding lot sizes is key for managing your risk level as a trader. Trading micro lots keeps your risk lower since each trade only involves a small amount. But it also means your profits will be smaller. Standard lots offer bigger profit potential but increase your risk as well.
Whichever type you use, paying attention to lot sizes can help you feel more in control of your trading.
What is a Typical Forex Lot Size?
When trading forex, you’ll have the choice of different lot sizes depending on your specific goals, requirements, and risk appetite. These lot sizes range from standard lot sizes all the way down to nano lots and are based on the amount of currency you’ll trade with each lot.
| Lot | Units of Currency |
|---|---|
Standard Lot |
100,000 |
Mini Lot |
10,000 |
Micro Lot |
1,000 |
Nano Lot |
100 |
Let’s now look at these different lot sizes in more detail.
Standard Forex Lot Definition
As appears from the table above, a standard lot is equal to 100,000 units of the base currency in a currency pair. For example, in the EUR/USD currency pair, the EUR is the base currency, and a standard lot will be the equivalent of 100,000 EUR.
To illustrate this better, let’s look at a simple example. Let’s assume you want to trade the USD/CAD currency pair. When you trade a standard lot of this currency pair, you’ll, in effect, trade US$100,000.
This, ultimately, means that movements in the price, both up and down, can have a significant impact on your account balance. For example, in a currency pair based on the US dollar, a pip will equal about $10 when trading a standard lot. So, a movement of 20 pips will equal a profit or loss of $200.
As a result, there is substantial risk involved when trading with standard Forex lots. Because of this, standard lots are mostly used by large traders or those traders who make a living from trading forex.
Mini Lot
Moving down from standard lots, you’ll find mini lots. A mini lot is equal to 10,000 units of the base currency in a currency pair. Put differently, a standard lot equals 10 mini lots.
Once again using the EUR/USD currency pair, a mini lot will be the equivalent of 10,000 EUR. This means that any movements in the price will have a smaller impact on your account balance. Here, a pip will equal about $1 in a US dollar-based currency pair.
Considering the above, you’ll make less profit when trading with mini lots, but you’ll also have less risk. However, when trading mini lots, you should ensure that your account is well-capitalized as market movements can still have a significant impact on your account balance.
Micro-Lot and Nano-Lot
Moving away from mini lots, you’ll find micro and nano lots. Here, micro lots are one-tenth of the size of a mini lot or one-hundredth of the size of a standard lot. So, a micro lot equals 1,000 units of the base currency in a currency pair and one pip of a currency pair based in US dollars will equal about $0.10 when you trade forex using micro-lots.
Conversely, a nano lot equals 100 units of the base currency in a currency pair and is, therefore, equal to one-tenth of the size of a micro lot. Here, one pip of a US dollar-based currency pair will equal one cent.
Considering the above, it’s easy to see why many beginners start out with micro or nano lots, as trading with these limits your risk significantly. It is important, however, to keep in mind that not all brokers offer micro lots for trading and nano lots are even rarer.
Lot Size in Cent (Micro Currency) Accounts
When doing your research, you’ve probably seen that many forex brokers offer cent accounts and you’ve probably wondered what account these are. Simply put, with a cent account, your account balance is displayed in cents and not dollars. Moreover, all transactions and trades also take place in cents.
Let’s look at cent accounts in more detail by using a simple example. Let’s assume you want to open a cent account with a specific broker. As mentioned earlier, the first thing you’ll notice is that, if you deposit funds into your trading account, the balance will be reflected in cents. So, if you deposit $20 into your trading account, your balance will be 2,000 cents.
Now, let’s say you want to enter a trade of 0.1 lots of the USD/CAD currency pair. If you don’t use leverage, you’ll require $10,000 to enter the trade which means that, with the cent account, you’ll need 10,000 cents or $100.
In this case, because you’re trading 0.1 standard lots, one pip will equal 1 cent.
Сent accounts make it possible for you to trade forex with real money while still limiting your risks. In this way, you’re able to test out the trading platform, trading strategies, and proper risk management while using real funds. This makes cent accounts an excellent tool for new and beginning traders to learn more about forex trading.
An obvious drawback of cent accounts is that your profits will be small. Another drawback is that, psychologically, there is a significant difference in trading with cents compared to dollars.
What Lot Size Should You Use When Trading Forex?
Considering everything mentioned above, what lot size should you choose when trading Forex? Well, it depends on your specific goals, requirements, and risk appetite. For example, as mentioned earlier, larger traders and those traders who aim to make a living from forex trading, will typically trade with standard lots.
Conversely, if you don’t necessarily want to trade forex for a living but want to amplify your profits and, by implication, be willing to take more risks, a mini account will be appropriate. As mentioned earlier, though, when trading with a mini account, you’ll need to ensure that your trading account is well-capitalized.
When it comes to lot sizes, the best option for beginners is to use micro-lots or a cent account. This, as mentioned, allows them to trade with real money, learn and practice their skills, and limit their risks. Although a nano account can also serve this purpose and be ideal for beginners, it’s crucial not to trade with amounts that are too small as it removes the risk which, in turn, impacts trading performance.
No matter what lot size you choose, the key is that you exercise proper risk management and don’t use too much leverage which could increase the losses you could make when trading.
Top Forex Brokers with Micro and Cent Accounts
Now that we’ve seen what the different lot sizes and cent accounts are, let’s look at some of the Top forex brokers with micro and cent accounts.
RoboForex
Established in 2009, over 4.5 million traders have opened trading accounts with RoboForex. It’s properly regulated and gives traders access to a variety of stocks, indices, forex, and other assets.
As mentioned earlier, RoboForex offers traders a cent account that gives them access to 36 currency pairs. With this account, traders will only require a minimum of 10 USD, 10 EUR, or 10 CNY and can trade orders as small as 0,1 lots on MT4 and 0,01 on MT5.
Exness
Established in 2008, Exness gives traders access to 107 currency pairs, 81 stocks and indices, 13 cryptocurrencies, and 12 metals and commodities. Like RoboForex, Exness is also properly regulated in various jurisdictions.
Exness provides a Standard Cent account that allows beginners to learn to trade forex using micro-lots. As such, it gives them the ability to trade volumes as low as 0,01 lots. Keep in mind, however, that the Standard Cent account is only available to traders using the MetaTrader 4 trading platform.
Forex4You
Founded in 2007, Forex4You has opened over 2,4 million trading accounts to date. It gives traders access to over 50 currency pairs, over 50 stocks, more than 15 indices, and commodities like gold and Brent crude oil. Like the brokers mentioned above, Forex4You is also properly regulated.
Forex4You offers two different cent accounts. With the first, the Cent Account, traders can trade volumes as little as 0.01 lots and the account doesn’t require any minimum deposit. The Cent NDD Account also doesn’t require any minimum deposit and also allows traders to trade volumes as low as 0.01 lots.
The difference between the two accounts is the method of execution with the Cent Account offering instant execution while the Cent NDD account offers market execution.
Summary
Hopefully, this post helped illustrate the different lot sizes in more detail, how they’re calculated, and what lot size you should use when trading forex.
In summary, standard lots provide higher leverage but more risk, while micro lots enable smaller traders to practice with lower risk but also lower profit potential per trade. The choice depends on an individual's experience level and risk tolerance.
FAQs
In addition to the information provided above, we’ve also compiled a list of frequently asked questions that traders often have when it comes to lot sizes.
Is there a difference between trading standard lot sizes and micro lot sizes?
At their core, there’s no difference between trading in the different lot sizes. However, as trading in larger lot sizes involves more capital, the risk increases.
What lot sizes should I use when trading?
Ultimately, what lot size you choose when trading depends on your specific goals and risk appetite.
I’m a beginner, should I trade with standard lot sizes?
Nothing prohibits you from trading with standard lot sizes, but the risk might be too significant, especially when you’re a beginner. For this reason, it’s better to start trading with micro lots or cent accounts.
How much funds do I need to start trading forex?
Considering that many forex brokers don’t have any minimum deposit requirements, you can start off with as little money as you prefer. However, if you start off with an account balance that’s too small, you’ll often need to use too much leverage which increases your risk substantially.
Team that worked on the article
Dwight specializes in risk, corporate finance, alternatives, fintech, general business trends, and financial markets, and he has broad experience managing complex projects. Dwight is an author for the Traders Union website.
Dwight was a financial columnist for The Wall Street Journal and The New York Times during the Great Financial Crisis. He has served as Editor-in-Chief of Worth, a personal finance magazine for the wealthy, and as Editor of Risk, the premiere global publication about derivatives, risk management, and quantitative finance, based in London.
He has also served as Managing Editor at The Economist Group and ran the Americas operations of two British trade publications.
For the last 12 years, Dwight has worked as a freelance writer and editorial project manager, serving clients in the financial technology, banking, broker/dealer, consulting, asset management, and corporate sectors. This has given him considerable experience in idea generation and project management, working collaboratively to help clients meet their goals with little or no supervision.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
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Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.