So now we know that the broker is lending us money to trade based on the leverage settings. But how much money can I trade per trade? This is measured in units and there are 4 types:
- Lot equivalent to 100,000 units
- Mini Lot equivalent to 10,000 units
- Micro Lot equivalent to 1,000 units
- Nano Lot equivalent to 100 units
So when you enter a trade in EUR/USD and the prices are set as 1.3075 / 1.3078, the following is what is happening in the market
- Trade of 1 Lot (1), you actually entered the trade with 100,000 Euros
- Trade of 1 Mini Lot (0.1), you actually entered the trade with 10,000 Euros
- Trade of 1 Micro Lot (0.01), you actually entered the trade with 1,000 Euros
- Trade of 1 Nano Lot (0.001), you actually entered the trade with 100 Euros
Further to our leverage example, if you have an account of $250, with a leverage of 1:100, you are actually trading with $25,000. So can you enter a trade with 1 lot?
Of course not. 1 lot is $100,000, and you only have $25,000. How about mini lot then? Can we enter the trade with 0.1 lot?
