Before you open a trade, you need to calculate the right lot size that matches your account balance & minimizes the risk of blowing your account.
If you attempt to trade a lot size that is too big for your account balance, any losses you make will be very significant & your free margin will be eroded quickly, forcing a margin call & forceful closure of your trades at a loss.
What is the Biggest Lot Size in Forex?
A lot size of 1 is the biggest lot size in forex. The figure ”1” represents one standard lot or 100,000 units of an instrument.
When entering your preferred lot size, some brokers can allow you trade up to 200 standard lots per position, meaning 200 x 100,000 units = 20 million units of an instrument in one trade.
What is the Smallest Lot Size in Forex?
0.01 is the smallest lot size you can trade with any forex broker. The figure ”0.01” represents 0.01 x 100,000 units = 1,000 units of an instrument.
How To Calculate Lot Size in Forex
To calculate the best lot size for a $10 account balance, it depends on which instrument you are trading. We will use EUR/USD as a benchmark.
If the current EUR/USD exchange rate is 1.0900 & your leverage is 1:1000, then 0.01 lot will cost (0.01 x 100,000 units x 1.0900) /1000 = $1.09
So, a 0.01 lot size is the best for a $10 account because you only need to deposit a margin of $1.09 to enter a trade, & you will still have a free margin of $8.91.
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