Lot Size vs minimal contract?

Beginner Questions
1

Hello all, this is my first post. I have read alot about forex trading lately and I decided that I should learn as much as possible and later on give forex trading a shot.

Now, this post has a purpose, I need help to understand a few basics.
To me they are quite confusing.
This information is from the IAMFX broker.

Microaccount

•Minimum deposit: $500 USD
•Maximal deposit: $5,000
•Minimum lot size: 1,000
•Minimal Contract: 0.01
•Maximal Contract: 100
•Leverage: 400:1
•Stop Out Level: 100%

Lets say I fund my account with 500 USD, that would be my margin with 400:1 leverage.
Now I set my contract size to 0.01 and my lot size is 1000.
How does this work?
I got confused by doing the following (0,01 x 1000 = 10)
Would that be correct? To me that seems to be wrong thinking.

I hope You understod what I need to get explained, I messed up my mind and need correction.

1 Like
2

It looks to me that it is a standard account, where 0.01 of a standard lot equals 1000 units. I’m pretty positive thats is what it represents

100,000 units = 1 lot (standard)
10,000 units = 0.1 lot (mini)
1,000 units = 0.01 lot (micro)

Cheers

3

ok, so I was just confused :slight_smile:

So if I trade a 0,05 lot.
And i have a margin before trade at 500 USD.
I want to risk 2% at each trade, what would my stop loss be? 20 pips?

4

Balance $500.00

Risk = 2% x $500.00 = $10.00

SL = Risk / $ per pip, so $10.00 / $0.50 = 20 pips

So yes that is right…

5

Thank you :slight_smile:

6

Uhm, this only works if USD Is the quote currency…

You have to consider the pair, the exchange rate, and the lot size to determine the correct pip value. Once you determine the pip value, you can then calculate your stop loss.

Here’s the school lesson on that topic: Pips and Pipettes | How Do You Trade Forex? | Learn Forex Trading

Oh yeah… One word of caution, it’s better to first compute where you will place your stop before computing your position size.