Currencies are traded in lots, which are batches of currency used to standardize the quantity for forex trades.
A standard lot is 100,000 units of currency. There are also smaller sizes available, known as mini lots and micro lots, worth 10,000 and 1000 units respectively.
|LOT||NUMBER OF UNITS|
In the past, spot forex has been traded in lots of 100, 1,000, 10,000 or 100,000 units
Most forex brokers will refer to lots by increments of 1,000 (micro lot).
Understanding a Micro Lot
A micro lot represents 1,000 units of any currency.
A one-pip movement for a micro lot corresponds with a $0.10 change.
For example, if you buy $1,000 against the Japanese yen at a rate of ¥109.00.
The exchange rate moves to ¥109.50, which means USD/JPY moved 50 pips.
You have made a profit of $5.
50 pips x $0.10 = $5
If the exchange rate falls 50 pips to ¥108.50 you will have a loss of $5.
Here are examples of pip values for EUR/USD and USD/JPY, depending on lot size.
|PAIR||CLOSE PRICE||PIP VALUE PER:|
|Unit||Standard lot||Mini lot||Micro lot||Nano lot|
|USD/JPY||1 USD = 80 JPY||$0.000125||$12.5||$1.25||$0.125||$0.0125|
In the interbank market, where banks trades with each other on online electronic platforms, the standard trading size, or standard lot, is 1 million units in the base currency. A “buck” is one million units of a dollar-based currency pair. A “yard” is 1 billion units.