What is Micro lot in Forex?
Choosing the right volume for trades is a very important consideration that many traders ignore. let’s see what is micro lot in forex. Micro lot can be a quick and easy solution to the problem of those traders who do not know how to minimize trading costs when learning business in the market. Forex Micro lot equals 1,000 currency units in your trading account. In this way, if the currency in your account is US Dollar, one micro lot will be $1,000.
What is micro lot?
A micro lot equals to 1.10 units of a currency. If the opposite currency is a US dollar, the value of a standard lot per 10 dollars per pip is 100000 units and the value of one mini-lot per dollar per pip is 10,000. If a currency such as the Japanese Yen, British Pound or Canadian Dollar is the opposite currency (the second currency pair), then the cost per pip will be determined by the conversion price of the market.
Micro Lot, like your margin, enables you to enter the market with less commitment. Many traders use this feature during market instability. Traders with the help of micro lot can keep track of the offensive movement of the market and estimate potential costs of a deal in the long run. Those traders who have little capital and may not have been able to enter the market before, can now trade in the market with the help of micro lot. This is particularly suited to novice traders or those who do not have the much needed capital to trade in different markets.
Micro lot leave traders away from a centralized commitment to a currency pair, so they can expand their business activities. This method, known as diversification, allows you to avoid the negative consequences of a large transaction.
How to avoid common mistakes with Micro Lot?
One of the common mistakes of many novice traders is the excessive use of leverage. Traders are leveraging over an untrustworthy business idea due to their unreliable trust. However, at the time of the start of a trade, the market results are highly vague and risk-oriented; so, using mini-lots or micro-lots, you can greatly reduce the effect of market fluctuations during a trade.
Of course, this does not mean that the deal will move in the same direction as you would expect. Maybe you’ll get a little profit, but it will make it possible for you to stay in the next trade if the market moves against you.
Learning the optimal use of leverage with a risk-matching ratio is perfectly synchronized and begins when you set a stop loss and a good profit margin for your transaction. A transaction with a reasonable strategy, the risk to reward ratio, good rewards and merchandise appropriate to or smaller than the size of its trading account is far more successful than trading with excessive leverage in its transactions and limits Loss or limitation of likelihood.