Lots and Position Size Basics: From Micro Lots to Standard Lots

What a “Lot” Really Means

A lot is a standardized way to express trade size in forex. Trade size determines your exposure (how much of the base currency you control) and, as a result, the pip value (how much money you gain/lose when price moves).

Most retail platforms let you choose size in either lots (0.01, 0.10, 1.00) or units (1,000; 10,000; 100,000). They represent the same thing.

Common lot sizes

• Micro lot: 0.01 lot = 1,000 units of the base currency
• Mini lot: 0.10 lot = 10,000 units
• Standard lot: 1.00 lot = 100,000 units

Example: On EUR/USD, buying 0.10 lots means you are buying 10,000 EUR versus selling the equivalent value in USD.

Exposure and Pip Value: Linking Size to Money Movement

Your pip value scales almost linearly with position size. For pairs where the quote currency is USD (like EUR/USD), pip value is especially straightforward.

Rule of thumb for EUR/USD pip value

These are approximations that hold closely for EUR/USD because the pip is 0.0001 and the quote currency is USD. If your account currency is not USD, the platform typically converts the pip value into your account currency automatically (or you can convert using the relevant exchange rate).

Continue in our app.

You can listen to the audiobook with the screen off, receive a free certificate for this course, and also have access to 5,000 other free online courses.

Or continue reading below...

Download the app

How Brokers Display Trade Size: Lots vs. Units

Brokers typically show size in one of two formats:

• Lots: you enter values like 0.03, 0.50, 1.20.
• Units: you enter values like 3,000, 50,000, 120,000.

Conversion is simple:

units = lots × 100,000 (for standard-lot convention)

So:

• 0.01 lot = 0.01 × 100,000 = 1,000 units
• 0.25 lot = 25,000 units
• 2.00 lots = 200,000 units

Some brokers also offer fractional unit sizing or different contract sizes on certain instruments, but in spot FX the 100,000-units-per-lot convention is the standard reference.

Margin Requirements Scale With Position Size

Margin is the portion of your funds set aside to support an open position. The key relationship is:

• Bigger position size → bigger notional exposure → higher margin requirement

A simplified way to think about it:

margin required ≈ (notional value of position) ÷ (leverage)

For EUR/USD, notional value in USD is approximately:

notional (USD) ≈ units of EUR × EUR/USD price

Example (illustrative numbers): EUR/USD = 1.1000, leverage = 30:1

• 0.10 lot = 10,000 EUR → notional ≈ 10,000 × 1.1000 = $11,000 → margin ≈ $11,000 / 30 ≈ $366.67
• 1.00 lot = 100,000 EUR → notional ≈ $110,000 → margin ≈ $3,666.67

Margin is not the same as risk. Margin is a capital requirement; risk depends on your stop-loss distance and position size together.

Trade Size vs. Risk: They Are Not the Same

Many beginners assume “smaller lot = smaller risk.” That is only true if the stop-loss distance is comparable. Your risk in money is driven by:

risk ($) = stop distance (pips) × pip value ($/pip)

This means:

• A small lot with a wide stop can risk more than a larger lot with a tight stop.
• A large lot with a tight stop can risk less than a smaller lot with a wide stop.

Quick comparison (EUR/USD, USD account)

Scenario A uses a smaller lot but risks more because the stop is much wider.

Practical Position Sizing for EUR/USD (Step-by-Step)

Below is a practical method to choose position size using a fixed account balance, a stop-loss distance, and a risk limit. This is the core workflow you will repeat for most trades.

Inputs for the example

• Account balance: $5,000
• Risk limit per trade: 1% of balance
• Planned stop-loss distance: 25 pips
• Pair: EUR/USD
• Account currency: USD

Step 1: Convert your risk limit into money

risk $ = account balance × risk %

risk $ = 5,000 × 0.01 = $50

Step 2: Determine pip value per lot (EUR/USD)

For EUR/USD (USD quote), approximate pip values:

• 1.00 lot ≈ $10/pip
• 0.10 lot ≈ $1/pip
• 0.01 lot ≈ $0.10/pip

Step 3: Compute the pip value you can afford

allowed pip value ($/pip) = risk $ ÷ stop (pips)

allowed pip value = 50 ÷ 25 = $2.00 per pip

Step 4: Convert allowed pip value into lot size

On EUR/USD, $10/pip corresponds to 1.00 lot. So:

lot size ≈ allowed pip value ÷ 10

lot size ≈ 2.00 ÷ 10 = 0.20 lots

Result: With a 25-pip stop and $50 risk, the position size is approximately 0.20 lots (20,000 units). If the stop is hit, the loss is about 25 pips × $2/pip = $50 (plus transaction costs).

Same account, different stop: see how size changes

Keep the same balance ($5,000) and risk (1% = $50), but change the stop-loss distance:

This table shows why you cannot choose lot size in isolation: the stop distance is part of the sizing decision.

Practical Notes When Your Account Currency Is Not the Quote Currency

If your account currency is not USD (for example, an account in EUR or GBP), the pip value for EUR/USD will be converted into your account currency. Many platforms show an estimated pip value and margin in the order ticket before you place the trade.

A practical workflow in that case:

• Use the platform’s displayed pip value for your chosen size, then adjust size until pip value × stop pips matches your money risk limit.
• Or calculate in USD first and convert the final risk using the current exchange rate between USD and your account currency.

Checklist: Selecting a Position Size Before You Place the Trade

• Pair: What instrument are you trading (e.g., EUR/USD)?
• Account currency: What currency is your account funded in (USD, EUR, etc.)?
• Stop distance: How many pips from entry to stop-loss (based on your plan, not on “what feels safe”)?
• Risk limit: What is the maximum money you will lose if the stop is hit (e.g., 0.5% or 1% of balance)?
• Compute size: Ensure stop pips × pip value equals (or is slightly below) your money risk limit.
• Margin check: Confirm you have enough free margin for the chosen size and that the trade won’t over-concentrate your available funds.
• Platform display: Verify whether the broker uses lots or units, and confirm the final number before sending the order.