Trading glossary

Lot size: meaning in trading

Lot size is how big a forex position is: a standard lot is 100,000 units, a mini lot 10,000 and a micro lot 1,000.

The lot size decides how much each pip is worth. On GBPUSD one standard lot pays 10 US dollars a pip, a mini lot 1 dollar and a micro lot 10 cents.

Choose it last, not first

Good traders decide the stop and the risk first, then work out the lot size that makes a full stop cost exactly what they planned to lose. That way a 10 pip stop and a 20 pip stop risk the same money.

Example: risking £100 with a 10 pip stop on GBPUSD needs about 1.3 lots when GBPUSD is 1.32.

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