The lot is the standard unit of position size in the Forex market. 1 standard lot equals 100,000 units of the base currency. Buying 1 lot of EUR/USD means committing the equivalent of €100,000.
To let retail traders take smaller positions, brokers offer:
- Mini-lot: 10,000 units (0.1 lot)
- Micro-lot: 1,000 units (0.01 lot)
- Nano-lot: 100 units (0.001 lot, rare)
Lot size determines the pip value and therefore your financial exposure to each price movement. It's your main lever to adjust risk per trade. A beginner with $1,000 should never trade 1 standard lot: 1 pip = $10 = 1% of their capital, so a 100-pip move against them theoretically wipes them out.
A classic money management rule: never risk more than 1-2% of capital per trade. To respect this, lot size is calculated based on the distance to the stop-loss.