Forex Trading Tips - Understand Forex Lots
If you are starting out in Forex trading you will hear the term lot. It is one of the first concepts to understand. You must have a clear understand of what it means to start Forex trading. In the forex market the base unit size of any forex transaction is referred to as a forex trading lot. "I will take 10 lots of the usd against the British pound" you have heard the phrases before; In most cases, one standard lot is equivalent to 100,000 units of the base currency.
You may remember that the base currency is essentially just the first currency of a currency pair, for example in the EUR/USD currency pair the base currency is the EUR and the 'quote' currency is the USD; this means that you if you buy 1 lot (100,000 EUR) you will pay for it in USD and if you buy 5 lots of the Euro as stated earlier, you would pay for 500,000 Euros using the equivalent amount of British pounds.
You may remember that the base currency is essentially just the first currency of a currency pair, for example in the EUR/USD currency pair the base currency is the EUR and the 'quote' currency is the USD; this means that you if you buy 1 lot (100,000 EUR) you will pay for it in USD and if you buy 5 lots of the Euro as stated earlier, you would pay for 500,000 Euros using the equivalent amount of British pounds.
Why do we need to know this? If you have a 10,000 dollar account with your forex broker, they may give you leverage of 100:1 (for every dollar in your account you may trade 100 dollars worth of any currency in the forex market) you can gain full control of a maximum of 10 lots of any base currency in the market. If you have a micro account but want to control lots 100,000 units in size, you will definitely need to increase the amount of money in your account. Do not make the erroneous decision to use large leverage to control lots greater than permissible for your account type as the risk just isn't worth it.
When you start out trading the forex market, begin with a small number of lots. The best size is between 1 and 3. After you gain some experience you may find that this is sufficient to be a successful trader in the market. Once you become more experienced, and possibly have 10,000 dollars and above in your account, you can increase the size of your lots and the number of lots to trade in accordance with your trading and risk management strategy. - 23159
You may remember that the base currency is essentially just the first currency of a currency pair, for example in the EUR/USD currency pair the base currency is the EUR and the 'quote' currency is the USD; this means that you if you buy 1 lot (100,000 EUR) you will pay for it in USD and if you buy 5 lots of the Euro as stated earlier, you would pay for 500,000 Euros using the equivalent amount of British pounds.
You may remember that the base currency is essentially just the first currency of a currency pair, for example in the EUR/USD currency pair the base currency is the EUR and the 'quote' currency is the USD; this means that you if you buy 1 lot (100,000 EUR) you will pay for it in USD and if you buy 5 lots of the Euro as stated earlier, you would pay for 500,000 Euros using the equivalent amount of British pounds.
Why do we need to know this? If you have a 10,000 dollar account with your forex broker, they may give you leverage of 100:1 (for every dollar in your account you may trade 100 dollars worth of any currency in the forex market) you can gain full control of a maximum of 10 lots of any base currency in the market. If you have a micro account but want to control lots 100,000 units in size, you will definitely need to increase the amount of money in your account. Do not make the erroneous decision to use large leverage to control lots greater than permissible for your account type as the risk just isn't worth it.
When you start out trading the forex market, begin with a small number of lots. The best size is between 1 and 3. After you gain some experience you may find that this is sufficient to be a successful trader in the market. Once you become more experienced, and possibly have 10,000 dollars and above in your account, you can increase the size of your lots and the number of lots to trade in accordance with your trading and risk management strategy. - 23159
posted by X - Men @ 8:03 AM
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