Lessons › Markets of the world › Lot sizes compared

World 6 · Markets of the world · lesson 9 · level 3

Lot sizes compared

One unit means very different amounts in different markets, so check what one lot is worth before you trade.

In one line

One unit means very different amounts in different markets, so check what one lot is worth before you trade.

Explained simply

Imagine buying sweets: one shop sells them one at a time, another only in bags of 100, and a third only in giant crates. Markets are the same, so 'buy one' can mean one share, 100 shares or 100,000 units of a currency. Always check what one unit is worth before you trade.

The lesson

In India's cash market and in the US you can buy a single share, while Tokyo shares usually trade in units of 100 and India's F&O contracts come in exchange-set lots. In forex a standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000, and crypto can be bought in tiny fractions. Futures contracts have fixed sizes, so the money value of a one-point move differs widely between markets. On EUR/USD one pip is worth about 10 dollars for a standard lot, 1 dollar for a mini lot and 10 cents for a micro lot.

A worked example

Illustrative example: on EUR/USD one pip is 0.0001, so on a standard lot of 100,000 euros it is worth 10 dollars (100,000 times 0.0001). A 20-pip stop on a standard lot risks 200 dollars (20 times 10). On a micro lot of 1,000 euros each pip is worth 0.10 dollars (1,000 times 0.0001), so the same stop risks 2 dollars (20 times 0.10).

The same idea at four levels

1. Beginner. One unit means different amounts in different markets, so check what one unit is worth first.
2. Foundation. India's cash market and the US allow single shares, Tokyo uses 100-share units, and India's F&O uses exchange-set lots.
3. Intermediate. Forex lots are 100,000 units (standard), 10,000 (mini) and 1,000 (micro), so one EUR/USD pip is about 10 dollars, 1 dollar or 10 cents.
4. Advanced. Futures have fixed sizes, such as 1,000 barrels of crude, so a small move can be worth far more than on one share.
5. Expert. Experts turn every stop into money for the exact lot before entry and pick the smallest lot that keeps risk within their limit.

Mistakes to avoid

• Assuming one lot means the same amount in every market.
• Using a standard forex lot on a small account, which makes each pip worth far too much.
• Forgetting that each futures tick is worth a fixed money amount per contract.

Goal of this lesson: Compare the smallest tradable amounts and contract sizes across markets and work out the money value of a move.