Lot
The standard trade size in forex: 100,000 units of the base currency, with mini and micro variants.
The standard trade size in forex: 100,000 units of the base currency, with mini and micro variants.
A standard lot is 100,000 units of the pair's base currency, a mini lot is 10,000 and a micro lot is 1,000. The lot is the dial that converts pip distance into dollars: on a USD-quoted pair a standard lot moves about $10 per pip, a mini about $1 and a micro about $0.10. Everything about risk - stop distance, leverage needed, drawdown tolerance - follows from the lot you choose.
Choosing a lot is not a forecast, it is a budget. The usual method starts with the money you are willing to lose on the trade, divided by the pip distance to your stop, giving the lot size that makes the stop cost exactly that amount. Traders who pick lots first and stops second invert the sequence, and their account balance pays for the inversion whenever a stop is hit.
Worked example
You can risk $50 and your stop sits 25 pips away. $50 divided by 25 pips is $2 per pip - about 0.2 of a standard lot, or two mini lots on a USD-quoted pair. The position size follows from the risk, not the other way around.
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