Appropriate position sizing is closely related to effective Risk Management. To understand whether it is best to trade standard, mini or nano lots, the trader must consider several important factors:

• – Total capital base
• – Trade duration
• – Market dynamics and volatility
• – Risk appetite

 
Here’ a quick reminder of what different lot sizes mean:

1 Micro lot = 1,000 units of a currency

1 Mini lot = 10,000 units.

1 Standard lot = 100,000 units.

By selecting a different lot size, the trader can determine the amount of nominal currency they want to buy/sell, and thereby, select their desired risk exposure per pip.

A pip, which is short for “percentage in point” or “price interest point”. Effectively, it is the smallest increment by which a currency pair could change at any one time. 

For most currency pairs, a pip is 0.0001, or one-hundredth of a percent. For pairs that include the Japanese yen (JPY), a pip is 0.01, or 1 percentage point.