We will explain two essential concepts in Forex trading: “Lots” and “Margin Trading.” These are basic concepts you should understand before trading:

  • Trading in Lots:
    • In Forex, trades are conducted in units called “Lots.”
    • There are three common lot sizes: micro-Lots (1,000 units of the base currency), mini-Lots (10,000 units), and standard-Lots (100,000 units).
    • The size of your trade is referred to as the “lot size” and determines how much of the currency pair you control.

Example: If you purchase a mini-Lot of EUR/USD, you will control 10,000 euros.

  • Margin Trading:
    • Margin trading allows you to control a larger lot size than your account balance might allow.
    • It requires an initial deposit called “margin.”
    • Margin is expressed as a percentage, such as 1% or 2%, and varies depending on the broker and currency pair.
    • Margin trading enables leveraged trading, meaning you can control a larger value than your initial investment.

Example: If you have a 1% margin and want to trade a standard-Lot of EUR/USD (with a balance of 100,000 euros), you will need a margin of 1,000 euros (1% of 100,000 euros).

  • Responsible Use:
    • Margin trading can increase both profits and losses.
    • Trading with high margin can be risky, so use it responsibly.
    • Set loss limits (stop-loss) to protect your investment.