Lot size
Family I · Instruments
Not to be confused with lot, standard lot, micro lot.
Lot size is the fixed number of units of the base asset that one contract represents. It is defined by the exchange for futures or by the broker for forex and CFDs, and it determines the monetary value of each price increment. Because lot sizes vary by instrument and venue, the same price move produces different profit or loss depending on the contract size traded.[1]
How lot size works
Every derivative contract specifies a lot size, which is the multiplier applied to the quoted price to obtain the notional value. For example, a crude oil futures contract on NYMEX has a lot size of 1,000 barrels, so a $1 move in the price equals $1,000 per contract. In spot forex, a standard lot is 100,000 units of the base currency, but brokers may offer smaller sizes such as mini lots (10,000 units), micro lots (1,000 units) and nano lots (100 units).
Lot size directly affects pip value and margin requirements. The pip value for a standard lot in most currency pairs is approximately $10, while a micro lot gives roughly $0.10 per pip. Traders adjust lot size to control risk exposure relative to account equity.
Worked example: pip value for different lot sizes
Assume a trader buys EUR/USD at 1.1000 and the price moves to 1.1010, a gain of 10 pips. The pip value depends on the lot size chosen.
Variations across markets
Lot sizes are not universal. Futures contracts have fixed sizes set by the exchange, such as 5,000 bushels for corn or 100 troy ounces for gold. Forex lot sizes are conventions rather than exchange rules, and brokers may define their own contract sizes. Always check the contract specifications for the instrument and venue before trading.
Often confused with
- lot
- A lot is the generic term for any standardized contract quantity, while lot size is the specific numerical value of that quantity; the visible sign is that lot size always appears as a number (e.g., 100,000 units) whereas lot is used as a category label.
- standard lot
- A standard lot is one specific, widely used size (typically 100,000 units in forex), whereas lot size is the general concept that can refer to any size; the visible sign is that standard lot is a fixed named quantity, while lot size varies by instrument and broker.
- micro lot
- A micro lot is a particular small contract size (typically 1,000 units in forex), whereas lot size is the broader term for whatever quantity a contract represents; the visible sign is that micro lot is a proper noun-like label for a predefined size, while lot size is a variable parameter.
See also
References
- ↑ Contract specifications published by the broker or exchange for each instrument. Lot sizes, tick sizes and pip values are set per instrument and differ between venues; read the specification for the symbol you trade.