What is a lot size in trading?

The three lot sizes you’ll see

Name	Lot size	Forex (e.g. EUR/USD)	Gold (XAU/USD)	1 pip is worth*
Standard lot	1.00	100,000 euros	100 ounces	$10
Mini lot	0.10	10,000 euros	10 ounces	$1
Micro lot	0.01	1,000 euros	1 ounce	$0.10

*For gold and for pairs where the US dollar comes second, on a dollar account. If pips are new to you, start with what is a pip.

You aren’t limited to these three. You can trade any size in steps of 0.01: 0.03, 0.25, 1.40 and so on. In MetaTrader 5 the lot size is the Volume box on the order screen.

What a lot means in real money

Lot size decides two things: how big your position is, and how much each pip of movement is worth to you.

Position size. 0.01 lots of gold is 1 ounce. With gold at $4,030, that’s a $4,030 position. 0.10 lots is 10 ounces, a $40,300 position. You don’t need that much in your account, because your broker only asks you to set aside a small part of it as margin. That’s leverage, which we cover in the next lesson.

Money per pip. This is the number that matters day to day. Take one gold trade with an 80-pip stop ($8 below the entry) and look at what different lot sizes would lose if the stop is hit:

Lot size	1 pip	Loss if the 80-pip stop is hit
0.01	$0.10	$8
0.05	$0.50	$40
0.10	$1	$80
0.50	$5	$400
1.00	$10	$800

Same trade, same entry, same stop. The only thing that changed is the lot size, and the loss went from $8 to $800. That’s why lot size matters more than any entry technique.

How to choose a lot size

Don’t pick a lot size because it feels right, or because someone else uses it. Work it out from three numbers:

1. How much you’re willing to lose on this trade. Many traders use 1% of their balance or less. On a $2,000 account, that’s $20.
2. How far away your stop loss is, in pips. Say 50 pips.
3. What one pip is worth per standard lot. On gold, $10.

Lot size = $20 ÷ (50 × $10) = 0.04 lots.

The lot size calculator does this for you, rounds down to the nearest 0.01 so you never risk more than planned, and has a table of common gold lot sizes.

Why bigger stops mean smaller lots

A wide stop isn’t more dangerous if you size it properly. The lot size shrinks to keep the money at risk the same:

Account	Risk (1%)	Stop	Lot size	Loss if stop is hit
$2,000	$20	20 pips	0.10	$20
$2,000	$20	50 pips	0.04	$20
$2,000	$20	100 pips	0.02	$20

That’s the whole idea of position sizing: the stop goes where the trade idea is proven wrong, and the lot size adjusts to it, not the other way round.

Mistakes beginners make with lots

• Typing 0.1 instead of 0.01. One missing zero makes the trade ten times bigger. Check the Volume box before every order.
• Copying someone else’s lot size. A trader with a $50,000 account using 0.50 lots is risking a small share of their balance. The same 0.50 lots on a $1,000 account can wipe it out in one bad trade.
• Raising the lot size after a loss to win it back quickly. This is how small losing streaks become blown accounts.
• Forgetting the minimum. With a small account and a wide stop, even 0.01 lots can be more risk than you want. Then the honest choice is to skip the trade, not to drop the stop.

Key points

• Standard lot = 1.00, mini lot = 0.10, micro lot = 0.01.
• On gold, one standard lot is 100 ounces and a pip is worth $10 per lot.
• Lot size decides how much each pip costs you, so it decides how much you can lose.
• Work your lot size out from your risk and your stop, never by feel.

Next: leverage and margin, the reason a $1,000 account can open a $4,000 gold position, and why that cuts both ways.