Lot size on different exchanges
Trading in the foreign exchange market involves taking into account many different nuances that determine the profitability and riskiness of trading operations.
Moreover, some “little things” can play a decisive role in a certain situation on the stock exchange and significantly change the possible financial result of trading.
The Forex lot size is precisely the significant point that should be taken into account when calculating the volume of future transactions.
The main thing is to correctly determine the ratio of the value of this indicator and your own deposit, to identify the optimal indicator taking into account the risk and the desired profitability of operations.
Many traders do not even suspect how important this parameter is in the initial stages of trading, trying to conclude a deal of maximum volume.
In this material I will try to tell you the easiest way to calculate the optimal Forex lot size.
One lot in Forex is equal to 100,000 units of the base currency, which is where we should proceed when calculating trading volumes. You can trade both whole lots and their fractional parts, which usually have a value equal to 0.1 0.2 or 0.5 from the standard.
If necessary, you can open a trade with a volume of 0.7; to do this, simply write the required value in the window where the lot size is indicated
We should also not forget that the minimum volume is not always 100,000 units; this rule does not apply to trading cryptocurrencies, securities, futures and some other assets.
For example, if you decide to trade bitcoins in the trader’s terminal, then the size will already be only 1 bitcoin, while the minimum transaction that can be opened is 0.1.
Therefore, always check the specifications of the selected asset for the size of the lots and the value of the minimum volume with which you can open a transaction.
Share lot size - when trading on the stock exchange, this indicator is equal to 100 shares. That is, the cost of 1 lot of shares will be equal to the cost of 100 individual shares.
For example, at the moment, 1 Gazprom security costs 200 rubles, which means that when opening a transaction with a standard volume, we need to pay only 20,000 rubles.
The paradox lies in the huge difference in asset prices; the cheapest share can cost 1 dollar, while the price of some reaches several thousand per share.
What about other exchanges?
Precious metals - silver 5000 ounces, gold 100 ounces, platinum 50 ounces.
Other futures - 1 lot of oil is equal to 1000 barrels, copper is 25,000 pounds, and natural gas is traded at 10,000,000 thermal units.
Determining which lot size is suitable for trading
The optimal transaction volume is the value at which your deposit remains resistant to minor trend fluctuations directed against the main trend - rollbacks. It should be taken into account that the trading lot size differs depending on the selected asset.
Your order should not be closed at the first correction that occurs on your trading time frame.
For the calculation, a slightly non-standard methodology is used, which consists of several stages.
1. First, we analyze what correction indicator is typical on our timeframe, that is, we identify reverse price fluctuations. For example, our maximum rollback is 50 points.
2. Now we should calculate the size of the trading lot relative to the available deposit; it should be such that even if we have to close the position with a stop loss, the losses do not exceed the permissible size (1-2% from one transaction).
Here we should use the ratio of the cost of one point to the available funds; if one point with a transaction volume of one lot is approximately equal to 10 dollars, then a correction of 20 points will cost our deposit at least 200 US dollars.
And if we assume that the maximum allowable loss is 5%, then the deposit size should be more than $4,000.
By reducing the Forex lot size to 0.1, we can safely make transactions with a deposit of $400 without exposing it to great danger.
Based on this principle, you can calculate the required transaction volume, taking into account the lot sizes for almost any amount on the account, but do not forget that 5% is the maximum amount of losses that you can allow as a result of one transaction. Therefore, if possible, it is advisable to maintain an even smaller proportion.
We should not forget that the main guideline when setting a stop loss is still the market situation, and money management plays more of a supporting role.
Another guideline for you can be the amount of funds pledged; it should not exceed 10-15 percent of the amount of funds on your trader deposit.
Calculating the size of a Forex lot is a purely individual matter for each trader, and depends on the strategy and risk with which you trade, but still, certain boundaries should be observed and not open transactions of the maximum possible size.
- Script for calculating lots - http://time-forex.com/skripty/raschet-lotov-foreks