# CALCULATING CONTRACT SIZE

Forex is commonly traded in specific amount called lots. 1 lot will represent 100,000 units.
For Metatrader the smallest contract size is 0.01.

In the above example, if I enter a long position 1 lot of Gbp/Usd, I would have entered a contract size of 1.25087*100,000 units*1 lot = 125,087 USD.

If I entered 0.01 lot of Gbp/Usd, I would have entered a contract size of
1.25087*100,000 units *0.01 lot=1250.87 USD.

The change in a currency value relative to another is measured in pips. Let me give you a few more examples. It is important to know this so you are able to measure your risk and reward and put your stop loss positions accurately.

USD/JPY at an exchange rate of 107.559: (.01 / 107.559) x 100,000 = \$9.29 per pip if someone buy 1 lot of USD/JPY
EUR/USD at an exchange rate of 1.08752: (.0001 / 1.08752) X 100,000 = \$10.87 per pip if someone buy 1 lot of EUR/USD

It is important to take note that for JPY, the second decimal place is 1 pip while for other currency pairs such as the USD, the fourth decimal place is 1 pip. So take for the above example, EUR/USD at an exchange rate of 1.08752, when Euro/Usd moves from 1.08752 to 1.08762 it will be 1 pip. So if someone enters a contract size of 1 lot of Eur/Usd at 1.08752 and the price move from 1.08752 to 1.08952 this person would have made total of 20 pips which is equals to 200 USD. And if someone enters a contract size of 0.01 lot, the person would have made a profit if 2 USD.