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Trading Lots and Other Eco-Friendly Forex Trading Strategies

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Shutterstock Photo License - By Elle Aon

If you are looking for eco-friendly ways to run a business, then there are a lot of ideas that you might want to consider. One sustainable business strategy revolves around forex trading.

This may come as a surprising to you, because forex and other financial trading ideas aren’t well known for sustainability. However, it can actually be a very eco-friendly business strategy if you use it properly.

How Can You Create an Eco-Friendly Forex Trading Strategy

There are a lot of eco-friendly benefits of trading forex for a living. Here are some to consider:

  • You can use eco-friendly forex trading platforms, such as CedarFX.
  • You can trade currencies from home, which means that you can create a living without leaving your house. This lowers your carbon footprint, because you don’t have to use gas to travel.
  • You can indirectly support nations that are more committed to sustainability by taking long positions in their currencies.
  • You have a lot of flexibility with the types of tools that you use, so you can choose ones that aren’t very energy intensive and thereby leave a lower carbon footprint.

You can truly embrace a sustainable business model by trading currencies. You just need to apply the right strategies.

One strategy that sustainable forex traders need to consider is using forex lots. If you want to create a decent income while trading forex in the most environmentally friendly way, then you should learn how to use lots properly.

Trading Lots Are Ideal for Sustainable Viruses

Forex trading transactions are commonly dealt with in terms of lots. This is one thing that ethical and eco-friendly traders can learn from experts.

If you have read and research details on trading, you’ve probably encountered this term. But, if you’re a beginner in the trading industry and the market, you’re most likely confused about its role in eco-friendly Forex trading. Don’t worry! In this article, we’ll talk about the importance of lots in the trading market.

What’s a lot in Forex trading? It is the size of a trader’s trade or the monetary of trading transactions at any specific time. It is a unit of measurement in the trading market used to count a transaction’s amount, the number of currency units you intend to buy or sell.

What Are the Sizes of a Lot?

The sizes of a lot determine what type of lot you are buying or selling. There are four main types of lot sizes for Forex trading: the Standard, Mini, Micro, and Nano lots.

Standard Lot

A standard size for a lot is equivalent to 100,000 units of the base currency, and it’s usually the default size in the market. If you buy 1 lot of a currency pair, you specifically buy 100,000 units of the first currency in the currency pair. For example, you bought 1 lot of EUR or USD, it would mean that you actually bought 100,000 EUR.

Mini Lot

A mini lot is equal to 10,000 units of the base currency or 10% of the standard lot. It is one of the recommended sizes for beginner traders to avoid dangerous risks and huge losses.

Micro Lot

The micro size of a lot is equivalent to 1% of the standard lot. It is equal to 1,000 units of the first currency in a currency pair. If you open a 0.01 lot order, you’re trading for 1 micro lot.

Nano Lot

This is the smallest lot size you can trade. A nano lot is equal to 0.01% of a standard lot, 100 units of the base currency. However, there are times when it can be equivalent to 10 units, depending on what the brokers set the nano lot to. This lot size is the most common size used by beginners in the market. It’s also preferred by those who want to test their strategies.

Calculating Lot Sizes

It is essential for traders to understand how much they have to reserve to open a position. There are many ways to calculate the lot size, by yourself or with the help of other people or calculators.

Calculating Using Pips

Lot sizes are commonly calculated based on pip values. A pip or percentage in point is the change in value between two currencies or a given exchange rate. The value of a pip is commonly 0.0001 for most currency pairs, but for yen pairs, it is equal to 0.01.

By using pips and lot sizes, you can manually calculate how much your potential profit or losses will be. To find a lot size, here are the general steps you must follow:

  1. Compute for the risk in dollars. Calculate how much the risk is in terms of dollars using the risk percentage and the account balance.
  2. Calculate dollars per pip. Multiply the stop loss, in terms of pips, to the risk in dollars.
  3. Get the number of units. Lastly, multiply the dollars per pip by the specific multiplicator of the broker.

Using Size Calculators

For easy calculations, you can always opt to use lot size calculators. Many of them are available and accessible online. Some are offered by brokers themselves, and some are general lot size calculators. These calculators can show and suggest what position size you should trade depending on your risk level, your choice of currency pair, and stop-loss or pips.

Importance of Calculating Lot Sizes

Knowing your lot sizes is essential and helpful when trading. Lot sizes can aid you in balancing a trade since you’re optimizing the position volume in relation to the deposit amount. Also, proper lot selection and position increase process can help you determine what trading mode is most beneficial to you.

Lot Sizes in Other Markets

The term lot is also used in other markets or for other commodities. Different lot sizes for other commodities include:

  • Oil – 1 lot of Crude oil is equal to 100 barrels
  • Gold – 1 lot of Gold is equivalent to 100 ounces
  • Silver – 1 lot of Silver is equal to 5000 ounces
  • Gas – 1 lot of Natural Gas is equal to 100,000 cubic meters

Take Advantage of Lot as Eco-Friendly Forex Trader

When you are trying to make a living as an eco-friendly investor, you need to know the practices that are most likely to work. By assessing the risks and the maximum allowable lot size, you can manage the risks you might encounter when trading. You can prepare a model that can help you change and adjust data and volumes in the market. Also, you can adequately strategize how to prevent losses and gain more possible profits when trading. This will help eco-friendly forex traders get the highest possible ROI.

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