Transactions. If you really want to make sure that you are grasping the ins and outs of forex trading, you’re going to need to understand transactions a great deal. That’s because everything — and yes, absolutely everything — is going to rely on transactions. If you want to know what type of profits and losses that you’re dealing with, you’re going to need to understand transactions. In the world of forex, lot size relates directly to transactions. There are different sizes because it creates more flexibility in the market. However, this is also what makes forex so volatile. There’s a heavier trading volume that takes place that’s unlike anything else in the world.
The lot size is also the reason why forex is to available to just about everyone. Even though we always recommend starting out with plenty of trading capital, you can use micro-lot sizes to get in as a “baby” investor and then scale up as you get more trading capital. Is this recommend? Not at all. But let’s go over lot size in a little bit more detail.
The standard lot is going to be 100,000 units of the base currency, and there’s going to be a set pip value. In the case of EUR/USD, it’s going to be $10. It’s also referred to as a standard account.
If you can get away with it, you really want to make sure that you can go with getting a standard account.
However, there’s also the mini lot size, which is 10,000 units of the base currency. Using the same currency pair from earlier, this would mean EUR/USD at $1.
What about if you can’t get your hands on a mini account? That’s where that micro account comes in. It’s 1,000 units and the pip value is going to be $0.10.
Which account is right for you? Honestly if you really want to take advantage of leverage, you really need to make sure that you work with a standard account. That’s going to give you the best power when it comes to long term planning. This also assumes that you’ve done some demo trading before you even put money into the account. Again, even if you’re coming into forex from another investing platform there’s nothing that says you will automatically become a rockstar. Forex takes a different set of strategies than anything else, so you will need to make sure that you plan accordingly.
Don’t think that you have to rush, either. Just because you’re not ready for a standard account today doesn’t mean that you’re doomed to fail. There are plenty of forex investors that started out with a micro account and earned their way into a standard account.
Brace yourself, know your limits, demo trade until you’re ready to move up, and take it slow. Even though the newspapers and financial news outlets would like you to believe otherwise, there is always time to make more profits!