KNOWING FOREX LOT SIZES

Currencies in Forex are traded in Lots. Since forex traders always search for the most efficient ways to limit risks or at least lessen risk effects. For this purpose various risk management and money management strategies are created. The Lot size are part of the money management to control the ammount of risk that will be taken.

A standard lot size is 100 000 units. Units refer to the base currency being traded. For example, with USD/CHF the base currency is US dollar, therefore if to trade 1 standard lot of USD/CHF it would be worth $100 000. Example: GBP/USD, here the base currency is British Pound (GBP), a standard lot for GBP/USD pair will be worth £100 000.

There are three types of lots by size, Standard lots = 100 000 units, Mini lots = 10 000 units and micro lots = 1000 units. Mini and micro lots are offered to traders who open mini accounts on average size from $200 to $1000. Standard lot sizes can be traded with larger accounts only start from $ 10 000 but the requirements for a size of standard account vary from broker to broker.

The smaller the lots size traded, the lower will be profits, but also the lower will be losses. When traders talk about losses, they also use term “risks”. Because trading in forex is as much about losing money as about making money. Risks in Forex refer to the possibility of losing entire investment while trading. Trading forex is known as one of the riskiest capital investments.

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SMALL BUT CONSISTENT RETURNS

Most traders always dealing problem with big expectations and for unrealistic returns. Even most of those who claim to have made big returns have only done so in simulated environments or in trading competitions using game accounts where real money was not involved.

For most of us, a safe investment are limited to the rate of return that we can earn on our savings accounts or long-term deposits. The return would depend on the interest rate applicable in each country.

A novice trader usually will puts on a winning trade and gains between ten to fifty percent of his trading account. He forms a belief that, by trading, he can quickly become a millionaire. Indeed, they usually assume a 20% return per month to an estimate of 50% return per month.

But do you realize that fund money managers who were consistently profitable only make money returns of 15% or 25% a year? The key for their success is Small but Consistent Returns.

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