Lots and contract size
Lesson 4 of 4 · about 8 minutes
4 questions, each checked the moment you answer it.
7 steps · about 8 minutes
The interactive lesson walks these ideas one screen at a time and checks your answers as you go. The text below covers the same ground for reading.
A lot measures how much you are trading
The lot number on the order ticket sets how big the trade is. One standard lot of EUR/USD is 100,000 euro, and the example trade sets it to 0.40 lots, which is 40,000 euro. Size is what turns a price move into money: 0.40 lots is US$4 a pip, so 40 pips against the trade is US$160. What a trade can lose therefore depends on its size and on how far price travels against it before you are out.
On EUR/USD, the second-to-last digit counts whole pips
EUR/USD is quoted to five decimal places, and only two of them measure your moves: the second-to-last digit counts whole pips, and the last digit counts tenths of a pip.
Before a size can be worked out, three figures have to exist
A stop loss is an order you attach to a trade: you name a price, and if the market reaches it the trade closes. Every stop in this course arrives already measured, as a distance in pips. Choosing where one belongs on a chart is its own course later on, Where a stop goes.