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Lot

A standard quantity unit for a trade, such as 100 shares of stock or 100,000 units of a currency.

A lot is the conventional block size for an instrument. In US stocks a round lot is 100 shares. In forex a standard-lot is 100,000 units of the base-currency, with mini and micro-lot sizes below it. Options and futures trade in whole contracts.

Knowing the lot size is essential for position-sizing, because it determines how much money moves per tick or pip.

Example: 1 standard lot of EUR/USD is 100,000 euros. A one-pip move (0.0001) is worth $10. A micro lot (1,000 units) makes the same pip worth $0.10.

Related: standard-lot, micro-lot, contract, position-sizing

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

How a position size is worked outAccount size, risk per trade and stop distance feed into one box giving the number of shares.ACCOUNT SIZE$25,000your capitalRISK PER TRADE1%of the accountSTOP DISTANCE$0.50entry to stopPOSITION SIZE500 sharesrisk budget: $25,000 × 1% = $250position size: $250 ÷ $0.50 = 500 shares
Working out a position size. Three numbers decide how big a trade is: the account, the share of it put at risk, and the distance from entry to stop. One percent of $25,000 is a $250 budget, and a $0.50 stop divides into that 500 times.

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