A standard lot is a ,unit lot. So most retail traders with small accounts don't trade in standard lots. Most forex traders that you come across are going to be trading mini lots or micro-lots. It might not feel glamorous, but keeping your lot size within reason relative to your account size will help you preserve your trading capital to continue trading for the long term. If you have had the pleasure of reading Mark Douglas' Trading In The Zone , you may remember the analogy he provides to traders he has coached, which he shares in the book.
What is a lot? - ProfitF - Website for Forex, Binary options Traders (Helpful Reviews)
In short, Douglas recommends likening the lot size that you trade and how market moves would affect you, to the amount of support you have under you while walking over a valley when something unexpected happens. To illustrate this example, a very small trade size relative to your account capital would be like walking over a valley on a very wide, stable bridge where little would disturb you even if there was a storm or heavy rains.
Now imagine that the larger the trade you place the smaller and riskier the support or bridge under you becomes. When you place an extremely large trade size relative to your account balance, the bridge gets as narrow as a tightrope wire, such that any small movement in the market would be like a gust of wind in the example, and could send a trader the point of no return.
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How do you choose the best lot size for your specific trading strategy?
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What is a lot size and how to calculate a lot in Forex
In conclusion, understanding lot size is important to managing risk in forex trading. Therefore, choose the lot size that you trade with carefully. Recommended by ProfitF :.
Trading Forex, Binary Options - high level of risk. Please remember these are volatile instruments and there is a high risk of losing your initial investment on each individual transaction. Explanation of contract sizes lots.
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