Understanding trading volume can help you make quick and informed decisions when trading. It enables you to set and reach your trading goals, plus achieve your ideal premier status. Knowing how to figure out the trading volume is quite important in forex trading as it's used in other crucial calculations like margin and pip value.
In simple terms, trading volume refers to the amount of base currency a trader is trading. It is calculated using the following formula:
Trading volume = Number of lots x contract size:
Example 1
A client placed an order to Buy 3 lots EURUSD.
Trading Volume
= 3 x 100,000 EUR
= 300,000 EUR
Example 2
A client placed an order to Sell 3 lots UKOIL.
Trading Volume
= 3 x 1,000 Barrels
= 3,000 Barrels
Lot and contract size:
Lot refers to the standard unit size of a transaction. A standard lot is typically equal to 100,000 units of the base currency. Several lot types available include:
Standard lot: 1 lot = 100,000 units
Mini lot: 0.1 lot = 10,000 units
Micro lot: 0.01 lot = 1,000 units
Contract size is a fixed value which denotes the amount of base currency in 1 lot. It varies based on the trading instrument.
