Lot size is the “kilogram” of trading
Think of buying goods by weight. Lot size plays a similar role: it states the quantity you hold in the market, not the amount of money you are prepared to lose.
Value of a price movement
Using the original article’s example, when gold moves 100 points, or USD 1.00, profit or loss changes with lot size as follows.
| Lot type | Size | P/L for a $1 price move |
|---|---|---|
| Standard Lot | 1.00 | $100 |
| Mini Lot | 0.10 | $10 |
| Micro Lot | 0.01 | $1 |
Common lot sizes
In the standard XAUUSD example, one Standard Lot represents 100 troy ounces. Actual specifications can vary by broker, so always verify the contract specification.
100 oz in the standard example
One tenth of a Standard Lot
One hundredth of a Standard Lot
Why position size must fit the account
An oversized position can consume account equity quickly even when the chart moves only a little. Sizing the lot from the stop-loss distance lets you define risk before entry instead of allowing margin pressure or stop out to make the decision.
Example impact of adverse movement
| Size | Price moves $10 against | Price moves $30 against | Reserve shown in original example* |
|---|---|---|---|
| 0.01 Lot | −$10 | −$30 | $50–$100 |
| 0.10 Lot | −$100 | −$300 | $500–$1,000 |
| 1.00 Lot | −$1,000 | −$3,000 | $5,000–$10,000 |
*The reserve figures come from the original article and exclude required margin. They are not universal account-size recommendations.
Point value in the 1 Standard Lot example
SUMMARY
The practical takeaway
Choosing lot size is choosing how much exposure to carry. A larger contract magnifies every price change, so contract size should be selected only after entry, stop loss and the acceptable cash risk are known.