Pip value — Pip stands for percentage in points and it is the most comment increment of currencies. For Forex instruments quoted to the 5th decimal point e. For indices 1 pip is equal to a price increment of 1.

For other instruments 1 pip is equal to Tick Size. Profit — Your profit or loss marked with - for a trading scenario you calculated. Some instruments DAX30 and others charge 3 times Swap on Friday;For further details on individual instrumentpleasesee our "contract details".

Defining Lots

Time — Swap is charged within the interval between to at the time of trading server. Whilst every effort is made to ensure the accuracy of this information, you should not rely upon it as being complete or up to date. Furthermore this information may be subject to change at any time. We use cookies to give you the best possible experience on our website.

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What is a lot in Forex and how to calculate trading volume?

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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Contact us. Rebranding Why Us? Financial Security Scam warning NB! Login Start trading. Choose your language. Top search terms: Create an account, Mobile application, Invest account, Web trader platform. Both of these smaller lot sizes will tend to appeal to:. Finally, if you are a retail trader and have a particular lot size that you prefer to deal in, then you will want to choose an online forex broker that supports that unit, and this consideration should feature prominently in your choice of which broker to partner with.

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In order for a trader to effectively manage risk and other related specifics, such as an appropriate degree of leverage for their trading account, determining the proper lot size to trade can be of utmost importance, almost as important as deciding which direction you should take a position in. The size of the lots you trade in, which can affect the size of the positions you take, will directly impact the effect of market moves on the profit or loss resulting from a trading position. Basically, the key to effective risk management is to determine the optimum lot size for the amount of funds you have and are willing to put at risk in your trading account.

Measuring volatility in the currency pairs that we are most interested in trading allows you to gauge market conditions better and make more informed decisions.

In general, the more exchange rates fluctuate, the higher the market volatility is. Not only does volatility change from time to time in a particular currency pair, but volatility can also be different at any given time for the various currency pairs. Currency traders need to be aware of market volatility by having a means to assess it.

Definition of "Lot" in Forex Trading

One popular measure is historical volatility, which is related to the standard deviation of past price movements. Another more forward looking measure is observing the implied volatility in the option market for the particular currency pair you are trading. When it comes to volatility and lot size choices, traders need to be prepared to adjust their trading sizes downwards as volatility rises and upwards as volatility falls in order to take a more uniform degree of risk when they trade.

Astute traders should also consider adjusting stop loss and profit taking orders appropriately to account for substantial shifts in market volatility. In his classic trading book, Trading in the Zone, author Mark Douglas presents an interesting analogy by which to visualize the impact of using larger or smaller lot sizes when trading. His example asks the reader to equate for a moment their trading lot size with the degree of support they might have underneath themselves while crossing over a valley, although perhaps visualizing a steep ravine might get the point across even better!

Anyway, Douglas asks the reader to consider the impact of an unexpected event on their crossing of this valley.

If a trader uses a small lot size relative to their trading account size, then that is like making the crossing over the valley on a broad and firm bridge. Even if you experienced a storm while on the bridge, you will still probably feel secure in your footing and unlikely to fall off the bridge. In this analogy, the storm is much like the sharp moves or other severe market turbulence that forex traders can experience from time to time.

Forex Glossary - Pacific Financial Derivatives

In contrast, you can consider the situation where a forex trader instead uses a large lot size in relation to the amount of money they have decided to put at risk in their trading account. This would be analogous to crossing that same valley on a tightrope wire, where storms — or even a brief gust of wind — can overwhelm you and potentially make you lose your footing and fall. A useful trading tool to help determine the most suitable lot size to trade is the lot size calculator. This simple calculator tool is readily available online at many forex broker websites, and you can use most forex lot calculator programs completely free of charge.

This particular app can be downloaded free of charge, only takes up around 4 MB of mobile device storage, and has the following desirable features:. Another useful and closely related type of calculator commonly employed for risk management purposes that you can find online is a position sizing calculator. As a concrete example of one of these online calculators, please review the screenshot of the position sizing calculator available at Mataf. Figure 1 — Screenshot of Mataf. Note that the position sizing calculator at Mataf.