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A lot refers to the standardized trade size used in the forex market when trading currency pairs. The standard lot is 100,000 units of currency, while mini lots and micro lots are 10,000 and 1,000 units respectively. Forex brokers usually refer to lots in increments of 1,000, which is the micro lot.

For a micro lot, a one-pip movement corresponds to a $0.10 change. So, if you buy $1,000 against the Japanese yen at a rate of ¥109.00 and the exchange rate moves to ¥109.50, you have made a profit of $5. However, if the exchange rate falls 50 pips to ¥108.50, you will have a loss of $5.

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