Forex glossary
Position notional (notional value)
Documentation context: For FX, specify whether the amount is in base or quote currency; for other products, contract units and valuation follow the specification.
Notional is a position's reference amount, with a specified currency and calculation rule. In FX, lots times contract size gives base quantity; the exchange rate values it in quote currency. It differs from margin, account balance and trading profit or loss.
Illustrative example
How does it work in practice?
In a hypothetical EUR/USD contract, 0.10 lots at 100,000 EUR per lot gives 10,000 EUR notional. At 1.10 USD per EUR that is 11,000 USD; assumed 5% margin is 550 USD.
Margin is not the size of the position
Contract units, notional and leverage
EUR/USD model: one lot is 100,000 EUR; the rate is 1.10 USD per EUR. For a 0.20-lot position, assume equity of 5,500 USD and margin at 5% of notional.
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| Term | What it describes | Shared example |
|---|---|---|
| Lot (position unit) | A contract unit, not the account currency. | This specification defines one lot as 100,000 EUR. |
| mini lot (0.1 lot) | One tenth of a standard lot. | 0.10 lots represents 10,000 EUR. |
| Micro lot (0.01 lot) | One hundredth of a standard lot. | 0.01 lots represents 1,000 EUR. |
| Position size (lot quantity) | The lot count or unit quantity selected for a position. | 0.20 lots × 100,000 = 20,000 EUR. |
| Position notional (notional value) | Exposure stated in a currency, distinct from margin. | 20,000 EUR × 1.10 = 22,000 USD; 5% margin is 1,100 USD. |
| Leverage | Actual exposure relative to equity, distinct from notional relative to margin. | 22,000 / 5,500 = 4:1 effective leverage; 22,000 / 1,100 = 20:1 relative to margin. |
Takeaway: Convert lot count through contract size into notional first. State the denominator before calculating a leverage ratio.
Change an assumption, see the result
What changes if…?
Change USD notional. Compare its effect on model margin, effective leverage and P/L for the same percentage change in position value.
Linear USD exposure model: margin = notional ÷ offered leverage; effective leverage = notional ÷ equity. Hypothetical fixed margin rate, no costs or currency conversions. The value 30 is not a global limit or recommendation.
Check your understanding
Convert base quantity into currency-labelled notional without adding two valuations of the same position.
Show the answer and explanation
20,000 EUR, or 22,000 USD.
0.20 × 100,000 = 20,000 EUR; 20,000 × 1.10 = 22,000 USD. These value the same exposure in two currencies.
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Related terms
Sources and documentation
- CME Group: About Contract Notional Value
The lesson explains futures notional value as contract units multiplied by the current price, with contract size depending on the product.
Document read: - MetaTrader 5: Market Watch
Symbol specifications define contract size, volume constraints, margin calculation, execution rules and the commission charging model.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.