Assume that an investor opens a forex account by depositing $50,000.

Let us also assume that the current spot price of gold is $1,650 per ounce, and the investor expects the price of gold to decline. Therefore, the investor’s position direction will be SHORT. In this case, the investor will take a position of:

1 LOT = 100 ounces = $165,000 position size.

For this transaction, 10% of the position size will be used as margin from the account balance. Accordingly:

Initial Margin = $165,000 / 10 = $16,500 (An amount of $16,500 will be reserved from the account as margin to open the position.)

In summary, the investor has opened a short position with a size of 1 LOT = 100 ounces = $165,000.

If the gold price falls to $1,640, what will be the profit or loss on the investor’s account?

Since 1 LOT = 100 ounces = $164,000 position size,
the difference between position values will be $165,000 - $164,000 = $1,000 profit credited to the investor’s account.

Therefore, for every $1 price movement per lot, the equivalent change is $100.

If the investor had made the same transaction with 0.10 LOT, the following situation would occur:

0.10 LOT = 10 ounces = $16,500 (10 × $1,650)

For this transaction, 10% of the position size will again be used as margin. Accordingly:

Initial Margin = $16,500 / 10 = $1,650 (An amount of $1,650 will be reserved from the account as margin to open the position.)

If the gold price falls to $1,640, what will be the profit or loss on the investor’s account?

0.10 LOT = 10 ounces × $1,640 = $16,400 position size.
The difference between position values is $16,500 - $16,400 = $100 profit credited to the investor’s account.

Therefore, for every $1 price movement per 0.1 lot, the equivalent change is $10.