FOREX TRADING VOLUME,STANDARD LOT,MINI LOT AND MICRO LOT
When the currencies are traded, they are traded in lots. Understanding the lot size is very essential for the traders to know the profit or loss per pip and per pipette movement. Trading volume of currency means the volume of currency to trade.
Three widely used lot sizes of currency trading are standard lot, mini lot and micro lot. Choosing the lot size depends on the initial investment. While placing an order on a currency pair, lot size should be carefully selected.
Standard lot is the 100,000 unit of base currency. Mini lot is the 1/10 of the standard lot means 10,000 units of base currency.
Micro lot is the 1/100 of the standard lot means 1000 units of base currency.
Okay, now the problem is that with most of the forex brokers, you will not be able to choose the 100000, 10000, or 1000 unit of currency as lot size rather to enter 1, 0.10 and 0.01.
The cost of a pip and pipette,and the trading volume !!!
If an order is placed using the standard, mini or micro lot, the pip value and pipette value can be calculated using the following formulas.
Pip value = the value change in counter currency times the exchange rate ratio times the unit of currency traded.
Pipette value = the value change in counter currency times the exchange rate ratio times the unit of currency traded/10
You can find more about calculating pip and pipette value here.
Generally, the modern lot sizes 1, 0.10, and 0.01 are the equivalent to traditional standard, mini, and micro lot receptively.
Traders who are using the 1, 0.10, and 0.01 as lot size, generally do not calculate the pip and pipette value, using the above formulas rather they consider the 1, 0.10, and 0.01 as the pipette value of the orders.
Dear Trader, I you have any questions or suggestions, you can drop a comment below.
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