What is a lot?

A typical spot Forex is traded in lots.

• Standard lot size is $100,000; and
• Mini lot size is $10,000.

As currencies are measured in pips, a Forex trader needs to trade large amounts of a particular currency in order to see any significant profit or loss (ONE (1) Pip is the smallest increment of a currency).

Diffierent Forex brokers may have different ways of pip calculation, relative to lot size. Typically, all Forex broker will be able to determine and inform the Forex trader the value of pip is for the currency at the period being traded. As the market fluxuates, so will the pip value.

For example, a Forex trader use $100,000 lot size to trade.

Example 1:
USD/JPY at an exchange rate of 119.90. For every pip, there will be a profit/loss of $8.34.
(.01 / 119.80) x $100,000 = $8.34 per pip

Example 2:
EUR/USD at an exchange rate of 1.1930. For every pip, there will be a profit/loss of $9.99734.
(.0001 / 1.1930) X EUR 100,000 = EUR 8.38 per pip
EUR 8.38 x 1.1930 = $9.99734 per pip