Lots & leverage

Now that you can measure movement in pips, let's talk about size. Currency is traded in units called lots. A standard lot is 100,000 units of the base currency. Because that is a large amount for most people, brokers also offer a mini lot (10,000 units), a micro lot (1,000 units), and sometimes a nano lot (100 units). Your lot size decides how much each pip is worth: on a standard lot of most pairs, one pip is roughly ten dollars; on a micro lot it is about ten cents.

You do not need 100,000 dollars to trade a standard lot, and that is where leverage comes in. Leverage lets you control a large position with a small deposit called margin. At 30:1 leverage, a 3,000 dollar margin controls a 90,000 dollar position. The broker effectively lends you the rest for the duration of the trade.

Here is the part every honest mentor stresses: leverage magnifies losses exactly as much as it magnifies gains. A move that would earn you fifty dollars unleveraged can earn — or cost — you far more when leveraged. This is precisely why the large majority of retail traders lose money. Leverage is not free money; it is borrowed risk.

Leverage is not free money. It is borrowed risk, and the bill arrives in the same currency as the profit.

The practical lesson is to choose your lot size deliberately, not because the broker allows a bigger one. Start with micro lots. Feel what a real ten-cent-per-pip trade does to your emotions before you ever scale up. Size is a decision you make, not a default you accept.