Lots: standard, mini and micro

Two people open the same account balance and take the same view on EUR/USD. The first buys one standard lot. The second buys one micro lot. The price then moves against both of them by the same number of pips. The first account loses one hundred times more money than the second, because a standard lot controls one hundred times as many units.

The account balance does not change the size of a pip. A pip is worth what the lot size says it is worth, whatever sits in the account. So the same twenty pip move that costs the micro user a small amount can cost the standard user a large part of the deposit. The platform shows the same profit and loss number per pip for both, until the lot size is changed.

The right case is the micro user, and not because the view was better. The view was identical. The micro user survives to trade again after a wrong call. The standard user may not. Choosing the lot size is choosing how long a run of wrong calls can be absorbed before the account is too small to continue.

This is why the lesson puts the comparison first. Before any number is calculated, the question is which of the two cases the account can actually carry. A small account and a standard lot is the wrong case, even when the trade wins. A win on a size the account cannot carry teaches the wrong habit.

A pip value in dollars comes from the lot size and the price. For EUR/USD, one pip is 0.0001 of the quoted price. On 100,000 units, one pip is 10.00 USD. On 10,000 units, one pip is 1.00 USD. On 1,000 units, one pip is 0.10 USD. These three figures are fixed by the lot size, not by the account.

To turn dollars into shillings, multiply by the rate the broker gives. If the broker quotes KSh 129 to the dollar, a standard pip is 10.00 times 129, which is KSh 1,290. A mini pip is 1.00 times 129, which is KSh 129. A micro pip is 0.10 times 129, which is KSh 12.90. The rate changes daily and each broker sets its own, so recalculate rather than reuse an old figure.

The multiplication is the whole skill. Write the pip value in dollars, write the rate, multiply. Nothing else is needed to compare sizes. A reader who can do this can see, before opening a trade, what one pip of movement costs on each size the platform offers.

Keep the three results side by side. Standard KSh 1,290 per pip, mini KSh 129 per pip, micro KSh 12.90 per pip. The gap between them is the gap between a manageable loss and a damaging one on the same account. The next section uses these figures to size a stop.

A stop is the price at which the trade is closed to limit the loss. The distance to the stop, in pips, multiplied by the pip value in KSh, gives the money at risk. If the stop is twenty pips away and the pip value is KSh 129, the risk is 20 times 129, which is KSh 2,580. On a standard lot the same stop risks 20 times 1,290, which is KSh 25,800.

Decide the money first, then find the lot size that fits it. If a single loss should stay near one or two per cent of the account, the money figure is small, and only the smaller lot sizes fit it. The platform will let a larger size be opened with one click, but the click does not change the arithmetic. The arithmetic decides whether the account can take a run of losses.

The common mistake is to pick the lot size by what the platform makes easy. A default of one lot on a small deposit is not a recommendation. It is a setting. The reader who calculates the risk first is using the setting, not being used by it.

If the platform allows 0.01 lots, that is one hundredth of a micro lot, and it is the smallest step for learning. Some brokers start at 0.10 and some at 0.01, so the smallest size varies. A CMA-regulated broker must still show the costs before a trade, and those costs belong in the same sum as the stop distance.