Trading on exchange-based markets and the forex market is conducted in standard contract or lot sizes. Unlike the exchange-based market, the forex market doesn’t set restrictions on the size of a single contract. Theoretically you could place a single trade worth $1,384,284,927,944.01, assuming that you can find someone able and willing to take the other side of your trade—Dr. Evil, perhaps? Currency dealers on the retail market have carved up a standard $1 million interbank lot into three smaller lot sizes accessible to smaller retail traders, known as standard lots, mini lots, and micro lots.
Standard lots on the retail side of the currency market are equal to 100,000 units of the base currency. Mini lots are equal to 10,000 units of the base currency; micro lots are equal to 1,000 units of the base currency. Some currency dealers even offer trades in single units, allowing a trader to place an order for 13,428 units rather than a conventional lot size. This gives the trader very precise position sizing capability that’s unavailable in traditional exchange-based markets. A unit might be a single dollar, euro, yen, or whatever the denomination of your account. For example, a trade of 10,000 units is synonymous with a $10,000 position if your account is denominated in U.S. dollars.
Micro accounts offer new traders the ability to trade real money without placing a tremendous amount of money at risk. Typically a micro account measures profit and loss in terms of a single dollar per pip or even less, depending on the margin requirement deployed. These small lots are a great place for a new trader to cut his teeth on live money trading once he has demonstrated he can trade profitably on a demo account. They are also useful accounts for testing theories with a live money account. I keep a micro account with less than $1,000 in it for testing strategies on live markets with live money. Overall, micro accounts are a great option to get started with, even if you have $100,000.
Standard lots on the retail side of the currency market are equal to 100,000 units of the base currency. Mini lots are equal to 10,000 units of the base currency; micro lots are equal to 1,000 units of the base currency. Some currency dealers even offer trades in single units, allowing a trader to place an order for 13,428 units rather than a conventional lot size. This gives the trader very precise position sizing capability that’s unavailable in traditional exchange-based markets. A unit might be a single dollar, euro, yen, or whatever the denomination of your account. For example, a trade of 10,000 units is synonymous with a $10,000 position if your account is denominated in U.S. dollars.
Micro accounts offer new traders the ability to trade real money without placing a tremendous amount of money at risk. Typically a micro account measures profit and loss in terms of a single dollar per pip or even less, depending on the margin requirement deployed. These small lots are a great place for a new trader to cut his teeth on live money trading once he has demonstrated he can trade profitably on a demo account. They are also useful accounts for testing theories with a live money account. I keep a micro account with less than $1,000 in it for testing strategies on live markets with live money. Overall, micro accounts are a great option to get started with, even if you have $100,000.
