Cost of 1 lot when trading on Forex, simple cost calculation

When working on Forex, there are a lot of different perimeters that need to be calculated before opening a transaction, one of which is the cost of 1 lot.

Lot cost - the amount of funds in the deposit currency that must be paid when opening a transaction of one lot.

The parameter depends on the currency pair being traded. Calculating the cost of a lot is quite simple, but it should be taken into account that in addition to the trader’s own funds, leverage is also involved in the transaction; the higher it is, the less own funds are needed to secure the operation.

The standard lot size is 100,000 units of the base currency in a currency pair, meaning if a trade is made on EURUSD, the base currency will be the euro.

To carry out calculations you need to know the current quotation for EURUSD, for example 1.1051, multiply this figure by 100,000 and get $110,510. We should not forget that the quote has two values: Bid and Ask; for buy transactions we calculate by Ask, for sell transactions we calculate by Bid:
That is, to open a transaction of one lot on EURUSD, we will need $110,510, this is where the leverage, if its size is 1:100, then we divide the resulting amount by 100, now to open a transaction of 1 lot you will need only $1,105.

This takes into account the fact that you have a dollar deposit; otherwise, the amount is simply transferred at the current rate.

Using this approach, you can calculate the cost of a lot for almost any currency pair; the easiest way to do this is if base currency stands for the American dollar. In this case, one contract will be equal to $100,000.

Forex trading is not only about whole contracts, most brokers allow their clients to open trades in 0.1 or even 0.01.

Cent brokers and even provide the opportunity to trade from 0.001 contracts, which in terms of conversion is only 100 units of the base currency, and when using leverage, this amount becomes completely ridiculous. This approach makes it possible to get acquainted with trading without incurring large expenses.

Cost of shares lots

When trading on the stock exchange, there is a different approach to the cost of 1 lot of shares, here the standard contract contains 100 shares:

While the quote shows the price per share, that is, to calculate the cost of 1 lot of shares, you simply need to multiply the current quote by 100.

For example, shares of Apple Inc. are currently quoted at $159, which means the price of one contact of Apple shares at the moment will be $159,000.