I saw a document stating a standard lot has 100,000 units of currency. Is a unit of US currency a dollar or a penny?
I am looking at terms for funded forex trading. It says max trade size is based on equity in the account. For example, it says if available equity is $100,000, max trade size is 10 lots. So I read that as 10 lots x 100,000 units and form a picture of max trade size = $1,000,000 if units are a dollar or $10,000 if unites are a penny.
That funded forex account provider would have to be out of its mind to allow me to trade $1,000,000 on $100,000 in equity
Thank you for any information you can provide to help me understand lots and max trades.
Think of it like this.
One standard lot is 1.00 which is 100 000 units of Euro in a pair of EURUSD.
If you want to trade one standard lot you need to have more than $100 000 on your account.
But, if you have leverage then you can control more than 100 000 units of Euro which means you can control more than one standard lot, > 1.00.
You say you can control $1 000 000.
That means you have been given leverage 1:10 or higher. Because when you have leverage 1:10 you can control 10x more than you have invested.
If you invest $100 000 then you can control $1 000 000.
When you say you can trade $1 000 000 it does not mean you will spent $1 000 000.
In trading when you open a trade you define how much each pip will worth. Will that be:
1 pip = $10.00
1 pip = $1.00
1 pip = $0.1
this depends on you. You define that by selecting lot size.
If you select lot size to one standard lot = 1.00 that means you will have 1 pip = $10.00
If you select lot size to one mini lot size = 0.10 that means you will have 1 pip = $1.00.
If the price of a EURUSD pair changes from $1.2134 to $1.2135 it will mean the change by 1 Pip.
That means you will make $10.00 with that change if you have used one standard lot size = 1.00.
If you use one mini lot size = 0.10 you will make $1.00 with this price change.
To return back to your question about controling $1 000 000.
You are not able to spent $1 000 000, but it means you can control 10 standard lots = 10 x 1.00(lots) = 10 x 100 000 = 1 000 000.
That means, you can open maximum 10 lots which will give you:
10 lots = 10 x $10.00 = $100 per pip
If the price change for one pip you will make or lose $100.
If you have $100 000 you have invested you can lose that money if your trade goes against you for 100 1000 pips because:
$100/pip x 1000 pips = $100 000
If this not clear let me know so I can get into more depth to explain it with more details.
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its a nice post with so many information , got so many fine lines , thanks for your nice post again.
I don’t think there will be anything that I would have not understood about lots. In case of any query, I will get in touch with you.
thats a great info in detail.
You need to use more resources to better understand lots.