When trading Contracts for Difference (CFDs), you can speculate on the changes in the market price of various assets, without physically owning the instruments. How much money are you investing in each trade? The answer is simple: each time you open a trade, you actually purchase a specific amount or volume or an instrument. The measurement unit of the volume is one lot.
What is a Lot?
In currency trading, trades are executed in lots. The lot is the standard unit of measurement for a Contract for Difference (CFD) on a foreign currency instrument. One lot equals 100,000 units of the base currency in one trade.
As the lot could be a high figure for some, lower measurement units such as the mini lot (10,000 units) and the micro lot (1,000 units) are also available.
1 Lot = 100,000 units of the base currency.
1 Mini Lot = 10.000 units of the base currency.
1 Micro lot = 1,000 units of the base currency.
How is Lot Calculated?
As mentioned above, one lot equals 100,000 units of the base currency in a currency pair. Each open trade in lots represents how much of a currency you purchase or sell.
Therefore, if for example, you are trading 1 lot of EUR/USD, your contract size in the market is 100,000.
If you entered it with a mini lot of EUR/USD, it would be 10,000 units.
And finally, the micro-lot would be 1,000 units.
When opening a position in the market, e.g. in EUR/USD, you enter the market with a specific volume. So, if for example, you buy 5 mini lots of EUR/USD you are actually purchasing €50,000.
Additionally, 1 lot of the base currency represents 10 units of the quote currency, a mini lot represents 1 unit, and a micro lot represents 0.10 units.
1 lot = 10 units of the quote currency
1 mini lot = 1 unit of the quote currency
1 micro lot = 0.10 of the quote currency
What is the Maximum Trading Volume?
Traders Trust allows for different maximum trading volumes depending on each instrument category:
Forex – 1000 lots
Indices – 50 lots
Oils – 50 lots
Metals – 50 lots
Cryptocurrencies – 50 lots
Explore Traders Trust’s educational blog section, to broaden your trading knowledge and expand your trading experience by applying your newly acquired knowledge on a demo or live trading account.