Micro Lot
A micro lot is a trading unit used in foreign exchange (forex) trading. It is equivalent to 1,000 units of the base currency in a forex trade. A micro lot usually is the smallest position size that you can trade with. It is a fractional lot size that is 1/10th of a mini lot size, or 1/100th of a standard lot size. A micro lot allows traders to take a small position in a currency pair without risking too much on a single trade.
History of Micro Lot
The concept of micro lot trading was introduced by online forex brokers in the late 1990s. This allowed traders to open smaller positions in the forex market, which was previously only available to institutional investors and large banks. By allowing traders to open smaller positions, brokers were able to attract more traders to the forex market. This allowed traders to gain experience in the forex market without risking too much capital.
The introduction of micro lot trading also allowed traders to diversify their portfolios and spread their risk across multiple positions. This allowed traders to take advantage of the volatility of the forex market without risking too much on a single trade. Micro lot trading also allowed traders to test out different strategies without risking too much capital.
Comparison of Lot Sizes
| Lot Size | Units |
|---|---|
| Standard Lot | 100,000 |
| Mini Lot | 10,000 |
| Micro Lot | 1,000 |
Summary
A micro lot is a trading unit used in foreign exchange (forex) trading. It is equivalent to 1,000 units of the base currency in a forex trade. Micro lot trading allows traders to take a small position in a currency pair without risking too much on a single trade. It also allows traders to diversify their portfolios and spread their risk across multiple positions. For more information about micro lot trading, you can visit websites such as Investopedia, Forex.com, and FXCM.
See Also
- Standard Lot
- Mini Lot
- Lot Size
- Forex Trading
- Currency Pair
- Position Size
- Risk Management
- Leverage
- Margin
- Pip
