A trading lot is a specific quantity of units or the sum of assets used for executing a trade in a financial market. In forex trading, a lot represents the number of currency units involved in a trade. Understanding the different lot sizes and how to calculate trading volumes is crucial for effective trading.
Types of Trading Lots
In forex trading, the lot sizes are typically categorized as follows:
Standard Lot Size (1 lot): Equals 100,000 units of the base currency.
Mini Lot Size (0.1 lot): Equals 10,000 units of the base currency.
Micro Lot Size (0.01 lot): Equals 1,000 units of the base currency.
Calculating Trading Volume
To calculate the trading volume, you need to multiply the number of lots by the contract size. The trading volume is always calculated in the base currency of the pair.
Formula: Trading Volume = Number of Lots * Contract Size.
Examples
EURUSD.m
EURUSD.m price: 1.18212.
Contract Size: 100,000 units.
Trade: 5 lots.
Calculation: 5 * 100,000 = 500,000 EUR
Conversion to USD: 500,000 * 1.18212 = 591,060 USD
GBPUSD.s
GBPUSD.s price: 1.26600.
Contract Size: 100,000 units.
Trade: 5 lots.
Calculation: 5 * 100,000 = 500,000 EUR
Conversion to USD: 500,000 * 1.26600 = 633,000 USD
XAUUSD.m (Gold)
XAUUSD.m price: 2,300.00.
Contract Size: 100 units.
Trade: 2 lots.
Calculation: 2 * 100 = 200 XAU
Conversion to USD: 200 * 2,300.00 = 460,000 USD
Calculating Maximum Order Volume
To determine the maximum order volume you can open with your current amount of margin, follow these steps:
Calculate the margin required for 1 lot and convert it into the account currency.
Divide the free margin by the result from step 1.
Formulas
Forex:
Max Order Volume = Free margin / (1 * Contract Size / Leverage × Percentage / 100).
CFD:
Max Order Volume = Free margin / (1 * Contract Size * Market Price * Percentage / 100).
CFD-Index:
Max Order Volume = Free margin / (1 * Contract Size * Market Price / Tick Size * Tick Value * Percentage / 100.
Example
Max Order Volume for EURUSD.m:
Account Type: Pro.
Account Currency: USD.
Balance: 960 USD.
Leverage: 1:500.
Margin Calculation Mode: Forex.
EURUSD.m Price: 1.18212.
Calculation:
Forex = Free margin / (1 * Contract Size / Leverage * Percentage / 100).
Max Order Volume = 960 USD / (1 * 100,000 / 500 * 100 / 100).
Max Order Volume = 960 USD / 200 EUR = 960 USD / 364.24 USD= 2.63 lots of EURUSD.m
Note: When opening your trade with the maximum order volume, consider the spread, as it can affect your position.