What is myforex lot?

Success in the myforex currency market depends not only on the ability to make correct forecasts, but also on compliance with capital management rules. In particular, the risk under the transaction should not exceed several percent of the deposit amount. The size of the lot directly affects not only the win, but also how much you can lose if Stop Loss works.


What is Forex 's lot? How do I calculate the deposit item? What is the value of an item on Forex? These and many other important questions on the concept and calculation of the item we will consider in detail in this article


The sale and purchase of currencies on Forex takes place in lots. 1 Lot on Forex - unit of volume of trade transaction. Its value is 100,000 units of the main currency featured in the transaction. In order to understand the essence of the concept in more detail, it is desirable to return to the basics of the currency market. A trader buys one currency by paying another. If you take, for example, a pair of US dollar/yen, the standard 1 lot on Forex is 100,000 USD. And in the pair CAD/CHF the main currency is the Canadian dollar, respectively, the price of the lot - 100 000 C $. At the same time, in the first case you buy US dollars for Japanese yen, and in the second case you buy Canadian dollars for Swiss francs, and in each case the volume of one lot per Forex in the operation is 100,000.


It should be noted that on myforex  there is also such a concept as "reserve currency." It is the US dollar. And it is on the US dollar that the values of 1 lot are recalculated, of course, the values will be different for each weekly trading system instrument.


How do I calculate the lot on Forex?

Depending on the size of the item, we have different amounts of currency available for purchase. So, if you open a deal on 0.2 lot, and you see that the trend has gone in your direction, you will open also lot 2.0 - then take into account that the difference, both losses and losses will differ by 10 times.


When choosing a forex trading strategy on a particular pair, be sure to consider what size the lot on Forex will fit best. And it is necessary to rely on possible losses, not on such desired profit. This is one of the postulates of mani management, allowing at least not to drain your deposit. And although we cannot influence the direction of the trend, when optimizing calculations without taking into account the lot, there is no need. By selecting an item, you specify the amount of currency you want to buy or sell.


"It 's weird if I choose 1 lot, I 'll buy $100 000? And if I don 't have that money? "you say. Here the trader hands out a credit arm provided by the broker and giving the possibility to choose the permissible size of the lot, starting from 0.01. Although more brokers are ready to offer clients and cent accounts, that is 0.001 - in this case 1 point is equal to 1 cent.


So, according to the preliminary results:


The standard Forex lot is 100,000 units;

Mini-lot - 10,000 units;

Micro-lot - 1000 units.


Of course, if the trader replenishes the deposit by $100, the maximum that he will be offered is an item by 0.1. But if you top up a deposit by a few thousand or tens of thousands, you can bid in a standard unit lot. At the same time, it should be understood that a change of 1 item results in a $10 fluctuation on your deposit.


Examples of calculations of lot

We will calculate the item from the deposit in more detail. The very first is to determine the risk percentage. If expressed more accurately, it 's the amount of money you can afford to lose for one failed deal. If you are new and poorly oriented, the possible risk should not be more than 1%. As experience is gained, so does the size of the deposit. But it is not recommended to exceed 1% of the risk by 1 deal. Although when the ratio of correctly predicted transactions to incorrect deals reaches 45-55%, it is possible to think about expanding the risk percentage.


The size of the lot on myforex is closely related to the level of stop loss, that is, the maximum permissible price fluctuation in the opposite direction for the transaction. Let 's take a look at the example of Forex sales lot calculation on EUR/USD, here the base currency is the euro.


Let 's say there 's a deposit of $20 000. Your forex trading strategy involves putting Stop Loss at 65 pips. Credit shoulder - 1:100. You allow 1% risk. The current quotation is 1.0630. If we consider the standard 1 lot on Forex, the price of the 1 pips will be $10 (we multiplied 10630 * 0.0001 - the last digit indicates the cost of 1 item in the 4-digit quotation, if the quotation is 5-digit, then it is necessary to multiply by 0,00001).


So, for starters, we will calculate the risks: 1% of $20 000 will be $200. Now we determine the cost of 1 point: 200/65 = 3.08 US dollars. Using the knowledge of school mathematics by proportions, we determine the value of lot (X): 1/10 = Х/3,08. Of which X will be 0.3 is the appropriate lot size for these conditions. But don 't forget to take into account the spread, adding it to the stop loss. If the spread is 3 pts in the example, the foot size should be 68 pts.


Now let 's take an example where the base currency is the US dollar - USD/CHF with the current quotation 0.9546.


Let the other conditions remain the same: deposit of $20 000, risk of 1%, credit shoulder 1:100. Still, we can risk a maximum of 200 dollars in one transaction. The cost of 1 item is calculated using the formula: 10 USD/0,9546 = 10.48 USD. Now we apply the proportion: 1/10.48 = Х/200 (in the denominators of the ratio, respectively, the cost of 1 point and the maximum amount of losses per transaction). Of which X will be 19.08. Now it is left to divide this figure by the foot level and get the lot size: 19.08/65 = 0.29, which is easily rounded to 0.3. And we don 't forget the spread.


The type of forex trading strategy you use is important. After all, some strategies offer stable but small income along with low risks. Others, on the contrary, are designed for risky and sometimes adventurous attacks, but for this there is a significant profit.


How do I put an item in MetaTrader 4?

Everything is quite simple:


In the upper panel, select New Warrant.

In opened window we select lot size.


Since the concept of spread and credit arm was mentioned above, it will not be unnecessary to clarify them, because not all Forex participants immediately become experienced traders.


Spread - the difference between the purchase price and the sale price of a particular instrument specified in the points. For example, you can buy EUR/USD for 1.23, and sell for 1.20. The difference will be $0.03. Expressed in more precise terminology - 3 paragraphs, which is a spread. The first thing to understand: whatever deal you open, you will immediately have a negative result on this deal. If you go back to the example above, to go to zero, the schedule must go in the right direction of your 3 points. The spread can be considered one of the types of commissions charged by the broker. It should be noted that at dilling centers the spread is almost always floating (for the exception of micro-accounts). Thus, at the moment of release of important financial and economic news, speeches of politicians spread increases. It can also grow during periods of low liquidity of a particular instrument, for example, during certain seasons of the year or time of day.


The leverage is actually the funds provided by the broker to the trader so that the latter can carry out foreign exchange transactions. After all, it is unlikely that every merchant has the free tens and hundreds of thousands of dollars to make deals. The broker goes to meet us by "lending" the missing amount. It must be borne in mind that losses will also be proportional. For example, if you are offered a 1:100 credit arm, then you will be able to operate on an amount 100 times more than your deposit. And if you decide to open 1 standard lot, you will need not 100,000, but only 1,000 (which is called margin).


In conclusion, it is worth noting that brokers can offer a huge credit arm, up to 1:500, but the risks of loss are greatly increasing! Besides, as practice shows, the values of 1:100 are quite sufficient.

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