Market StructureLot Size
Contract Size
The number of units of the underlying instrument represented by one lot or one contract.
What Contract Size means
Contract size defines how much of the underlying one lot represents, and it varies by instrument class. In spot forex one lot is conventionally 100,000 units of the base currency. In commodity CFDs it might be 100 troy ounces for gold or 1,000 barrels for oil, and in index CFDs it is usually a set multiplier per index point. Exchange-traded currency futures have their own fixed sizes, such as 125,000 euros or 62,500 pounds.
Contract size is the bridge between lots and money: multiply it by the price to get notional value, and by the tick or pip increment to get the value of each price movement. Because it is set in the broker's instrument specification rather than by any universal standard, it must be verified per symbol and per broker before sizing a position. Assuming a familiar size when trading a new instrument is a frequent and expensive mistake.
Worked example
If spot gold has a contract size of 100 ounces, one lot at 2,400 US dollars is 240,000 dollars of notional and a one dollar move changes the position value by 100 dollars.
Related terms
- LotThe standard unit of trade size in forex, measured in units of the base currency.
- Standard LotA position of 100,000 units of the base currency, the benchmark trade size in forex.
- Notional ValueThe full market value of the underlying a position controls, calculated as lots times contract size times price.
- CFD (Contract for Difference)A leveraged OTC contract to exchange the difference in an instrument's price between opening and closing, without owning it.
- Currency FuturesStandardised, exchange-traded contracts to exchange currency at a set price on a fixed future settlement date.
Frequently asked questions
What does Contract Size mean in forex trading?
The number of units of the underlying instrument represented by one lot or one contract.
How does Contract Size work in practice?
Contract size is the bridge between lots and money: multiply it by the price to get notional value, and by the tick or pip increment to get the value of each price movement. Because it is set in the broker's instrument specification rather than by any universal standard, it must be verified per symbol and per broker before sizing a position. Assuming a familiar size when trading a new instrument is a frequent and expensive mistake.
What is an example of Contract Size?
If spot gold has a contract size of 100 ounces, one lot at 2,400 US dollars is 240,000 dollars of notional and a one dollar move changes the position value by 100 dollars.
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