Forex Lot: An Overview

Spot forex before was only traded in a certain amounts which is called as “lots.” A lot’s standard size comprises of 100,000 units. It composes of various sizes for mini, micro, and nano lot sizes which are 10,000, 1,000, and 100 units respectively.

The change in currency value which is relative to another is primarily measured in “pips.” Pips is a very small amount of percentage of a currency value unit. In order to grab an opportunity of this minute change in value, a larger amount of trade of a certain currency must be executed to see results of either profit or loss.   

For example, a (100,000 units) standard lot size is used. Here’s an illustration of recalculation to see how the value of pips is being affected.

1. USD/JPY at an exchange rate of 119.80(.01 / 119.80) x 100,000 is equal to $8.34 per pip

2. USD/CHF at an exchange rate of 1.4555(.0001 / 1.4555) x 100,000 is equal to $6.87 per pip

In this case, the U.S. dollar is not primarily quoted, and the formula is quite different.

1. EUR/USD at an exchange rate of 1.1930(.0001 / 1.1930) X 100,000 is equal to 8.38 x 1.1930 is equal to $9.99734, it will be $10 per pip if rounded up rounded up.

2. GBP/USD at an exchange rate or 1.8040(.0001 / 1.8040) x 100,000 = 5.54 x 1.8040 =     9.99416, it will be $10 per pip if rounded up.

A broker may have various ways of calculating the value of a pip relative to lot size. On the other hand, either which of the formula they do, they’re capable of telling you the pip value for the currency you are trading at a certain time. As the market moves, the pip value is moving also. The movement will depend on what currency you are trading.

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