Lot, concisely, is the size of the position you want to open.
When you open the order window to create a new position in your trading platform, you will be asked about the size of the position you want to open. First, you enter this variable. That is what a “lot” is.
As a principle, in all the foreign currency products, there are 100,000 in 1 lot. For example, in the EURUSD investment tool, you choose 1 lot, which means you are creating a transaction of 100,000 EUR. In the USDJPY investment tool, 1 lot means a position with the size of 100,000 USD. As for the GBPUSD investment tool, 1 lot means an investment with the size of 100,000 GBP.
As you can see, we take the currency that is on the left side of the parity in order to understand the magnitude.
We said that in currencies, 1 lot is always 100,000 units. In the intermediary firm, this size is not exceeded. Emtia and other products might be different. Generally, the intermediary firms might choose different sizes of magnitudes. However, it can be said that they obey some general rules.
How much it is in 1 lot in an investment tool is usually stated in your trading platform. To find that out, you need to find the features page of the investment tool you want. For example, if you go to the MetaTrader trading platform, click right on the window of “MarketWatch” and choose “Features” and a window where you can find the related section pops up. In this window, in the “Contract Size” section, you can see the prıduct amount of 1 lot.
Let’s say you saw 100 as a unit in the XAUUSD (Gold) investment tool. This means you will make an investment of 100 Oz in this 1 lot. If the leverage of your account is 1:100, you can make this investment with a deposit of 1 oz.
Let’s say you saw 100 as a unit in the US OIL (CrudeOIL) investment tool. This means you will make an investment of 1000 barrels of crude oil in this 1 lot. If the leverage of your account is 1:100, you can make this investment with a deposit of 10 barrels.
In Forex, you can use amounts that are lower than a lot as a position size.
If the investment of 1 lot is too much for you, you can choose a mini lot which is one-tenth of the lot. If you enter “0.1” instead of “1” in the lot section, that means you are choosing a mini lot and in that case, you will be trading one-tenth of the lot. To give an example, while 1 lot has a magnitude of 100,000 EUR in the EURUSD investment tool, 1 mini lot has a magnitude of 10,000 EUR. In this case, the magnitude of your position falls to one-tenth and surely, your margin and profit/loss will decrease equally.
If even the mini lot is too much for you, you can then choose a micro lot. If you write “0.01” in the lot area, it means you want a micro-lot. In that case, you open a lot that is equal to one percent of the lot. Your margin and profit/loss will be one percentage according to the lot.
The smallest unit of a lot is a micro lot. You can choose your lots in micro-lots and its multiples. For example, you can write 0.07 or 1.37.
We need to make a reminder. Not all the institutions allow mini or micro lot as a whole or on a product basis. If you are not able to choose these lots in the transaction window, that means your institution does not allow it.