Forex Order Calculator – Trading foreign exchange on margin involves a high level of risk and may not be suitable for all investors. Before you decide to trade foreign exchange, you should carefully consider your investment goals, experience level and risk tolerance. You may suffer a partial or total loss of your initial investment and you should not invest money you cannot afford to lose. Trading foreign exchange on margin involves a high level of risk and may not be suitable for all investors. Before you decide to trade foreign exchange, you should carefully consider your investment goals, experience level and risk tolerance. You may suffer a partial or total loss of your initial investment and you should not invest money you cannot afford to lose.
To trade currency pairs, you need to understand the concept of lots in forex. This guide explains what a forex lot is, why it is important, and how you can use it to calculate your position size.
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In Forex trading, a lot is a unit of measure that standardizes the size of the trade. The change in the value of one currency compared to another is measured in pips, which are the fourth decimal place and therefore very small measurements. This means that trading a single unit is not feasible, so many exist to enable people to trade these small movements in large lots.
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The value of a lot is determined by an exchange or similar market regulator, which ensures that everyone trades a certain amount and knows how much asset they are trading when they open a position.
Lots are divided into four sizes – standard, mini, micro and nano – to give traders more control over the amount of exposure they have.
Suppose a company sells boxes of chocolates in two sizes: 12 and 24 chocolates. These are the standard sizes and what consumers expect. They often don’t expect to buy a single chocolate out of the box.
It is the same with forex currency pairs. You cannot buy just one unit of money; instead you buy a lot. The lots have universally recognized standard dimensions. For example, you can buy 100,000 lots of GBP base currency for the GBP/USD currency pair. This is a standard bundle. Alternatively, you can buy a 1000 GBP micro-lottery.
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So, how much is a lot worth in Forex? It depends on whether you are trading a standard, mini, micro or nano lot. Forex transactions are divided into these four standardized units of measurement to account for small changes in the value of a currency.
The following examples all refer to the EURUSD currency pair, which compares the euro (the base currency) to the dollar (the quote currency). For context, if you buy EUR/USD, you assume that the euro will strengthen against the dollar. If the quote price is currently $1.3000, it means you can exchange €1 for $1.3000. To put it backwards, you need $1.3000 to buy €1.
A standard lot in Forex is equal to 100,000 monetary units. This is the standard unit size for traders, whether independent or institutional.
If the EURUSD exchange rate was $1.3000, a standard lot of the base currency (EUR) would be 130,000 units. This means that, at the current price, you would need 130,000 units of the quote currency (USD) to buy 100,000 units of EUR.
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A Forex mini lot is one tenth the size of a standard lot. This means that one mini-lot in forex is worth 10,000 currency units. The size of a mini lot means that the profit and loss effect is smaller than with a standard lot.
If the EURUSD exchange rate was $1.3000, a mini-lot of the base currency (EUR) would be 13,000 units. This means that, at the current price, you would need 13,000 units of the quote currency (USD) to buy 10,000 units of EUR.
A Forex micro lot is one tenth the size of a mini lot. This means that it is worth 1000 units of money. Pip movements translate into a cash swing of 1 monetary unit, for example €1 if you traded EUR. Micro lots also require less leverage, so a swing won’t have as much of a financial impact as larger lot sizes.
If the EURUSD exchange rate was $1.3000, one microlot of the base currency (EUR) would equal 1300 units. This means that, at the current price, you will need 1300 units of the quote currency (USD) to buy 1000 units of EUR.
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A forex nano lot is one tenth the size of a micro lot. It is equal to 100 units of currency. A one pip move with a microlot is equivalent to a price change of 0.01 unit of the base currency you are trading, for example €0.01 if you are trading EUR.
If the EURUSD exchange rate were $1.3000, one nanolot of the base currency (EUR) would be equivalent to 130 units. This means that, at the current price, you would need 130 units of the quote currency (USD) to buy 100 units of EUR.
You will not normally need to calculate the lot size yourself as your trading platform should tell you what you need to know. It should be clear when placing a trade what options are available – standard, mini, micro and nano – and what lot size you are using. You can calculate your overall position size based on the size of a lot and the number of lots you have purchased.
With you can trade standard or micro lots using CFDs. Our platform allows you to switch between the two before placing your order.
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To choose your lot size, think about the risk you want to take. The larger the lot size, the more money you will have to deposit or leverage you will have to use – and the more the movement of each pips will be amplified.
Remember that the value of the currency will depend on the base currency within the currency pair you are trading. As you can see, the smaller the lot, the less a one-pig move costs. In turn, this means you can have a smaller outlay by trading smaller lots.
You can trade Forex online with us. Before you start, you should read our guide on forex and how to trade currency pairs. Once you are familiar with the basics and how forex works, you can start live trading right away or create a free demo account to hone your skills.
In addition, with us you can take advantage of forex price movements over the weekend with our Weekend GBP/USD, Weekend EUR/USD and Weekend USD/JPY offers – which some other providers do not offer.
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When you trade with us, you will use CFDs to go long or short on the price of a currency pair. Going long means that you assume that the pair will increase in value, which means that the price is weakening from the base. Going short means that you assume that the pair will decline in value, which means that the price is strengthening from the base.
One of the main benefits of using CFDs to trade Forex is leverage. This allows you to open a position by prepaying a small percentage of the full value, but keep in mind that your exposure will be based on the full value of the trade.
To trade Forex effectively, you need to understand a lot. Here’s a reminder of what a lot is in Forex and why it’s important:
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The risks of loss from investing in CFDs can be significant and the value of your investments can fluctuate. 72% of retail client accounts lose money when trading CFDs with this investment provider. CFDs are complex instruments and carry the risk of losing money quickly due to leverage. You should consider whether you understand how this product works and whether you can afford to risk losing your money.
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