Lot size question

Beginner Questions
1

hi guys i would like to ask something related to the lot sizes…

what happens if i open a trade with micro lot size (1000 units) but i only invested 100$ for the micro lot? what will happen to my money?

thanks

2

In the FX market you don’t invest a particular sum on a trade. For 1 micro lot (1000 units), a pip value is about $0.10
So as the market keeps moving against you or in your favour, you keep losing more or making more until your Stop Loss order or Take profit order (if you had those) are triggered. Every pip would cost you about $0.10

The broker however takes part of your balance as margin for each trade, which is returned when the trade is closed whether you win or lose.

3

hmmm so what is the purpose of the lots?

standard lot
mini lot
micro lot

is it allowing the trader to choose how much money will come in or out to their account for every pip that goes in your favor and against you?

4

Standard lot - $10 a pip (100,000 units)
Mini lot - $1 a pip (10,000 units)
Micro lot - $0.10 a pip (1000 units)

Yes you set the orders (you choose how many units you want to risk, how far you want your position to go as far as TP/SLs - that determines how much your willing to win/lose on the trade)

5

ok thanks for helping me out.

hmmm my next question is what happens if your position is in margin. like if i want to open a micro lot trade. and i can only place 500$ for that trade. then the other 500$ is in margin.

do i pay interest to my broker?

6

You have a lot to learn my friend. Have you tried the school of pipsology?

As for your question, you won’t be placing any $500. Margin for each trade is calculated base on the leverage and nominal value of position. And your broker charges commissions and swaps.

7

yeah, im reading the school of pipsology right now

8

nominal value? you mean the amount of money playing as collateral for the broker?

9

Hi Gary,

You may find our earlier post on lots helpful: Capitalizing Accounts

We also explain margin and notional value that post.

And here’s a post where we explained rollover interest (AKA swap) in detail: Can someone explain to me what rollover interest is?

10

thanks you for helping me out

1 Like
11

does the broker charges a fee for the leverage?

like if i open a micro lot, placing my 500$ for the trade with 1:2 leverage to be able to open an micro lot. does the broker charges the 500$ i borrowed from them?

or they dont charge anything? i just pay x2 the spread then x2 the rollover fees and for every pip the goes in my favor i get +0.20 to my account balance and if it goes against my account balance will be charged -0.20?

thanks

12

Broker charge you spread when you open a trade. This is only fee that they take from you.

This is different if you use ECN broker who charge commission for every trade. Those commission are higher than spread you are paying with Market Maker broker.