The pip: the unit of movement

A pip is a pair's standardised minimum price change: 0.0001 on most pairs (the fourth decimal) and 0.01 on yen pairs (the second decimal). If EUR/USD moves from 1.1000 to 1.1025, it moved 25 pips. Platforms also show a fifth decimal (the «pipette», a tenth of a pip) — useful for measuring tight spreads.

The lot: the unit of volume

  • Standard lot (1.0): 100,000 units of the base currency.
  • Mini lot (0.1): 10,000 units.
  • Micro lot (0.01): 1,000 units — the usual minimum on standard accounts.
  • Cent account: the same volumes divided by 100 — one «lot» equals 1,000 real units, built for practising with real money at minimal risk.

Pip value: where it all comes together

The general formula: pip value = (pip size ÷ pair price) × volume. For pairs where USD is the quote currency (EUR/USD, GBP/USD…), the shortcut is direct: 1 standard lot ≈ 10 USD per pip, one mini ≈ 1 USD, one micro ≈ 0.10 USD.

Full example: you buy 0.5 lots of EUR/USD and price advances 30 pips. Result: 30 pips × 5 USD/pip = 150 USD. Same maths with price against you: -150 USD. No mystery — and no excuse for not doing it before trading.

From arithmetic to risk

The serious use of these numbers is position sizing. You decide to risk 1% of a 5,000 USD account (50 USD) with a 25-pip stop. Maximum volume = 50 ÷ (25 × 10) = 0.2 lots. That is the whole position-sizing formula: volume is the consequence of chosen risk and stop distance — never the other way round.

If the volume that comes out is below your account's minimum, the answer is not to widen the risk: it is to lower the per-trade risk target or use a Cent account.

Quick cheat sheet

  • EUR/USD rises from 1.1000 to 1.1050 → 50 pips.
  • USD/JPY rises from 155.00 to 155.80 → 80 pips.
  • 1 lot EUR/USD ≈ 10 USD/pip · 0.1 ≈ 1 USD · 0.01 ≈ 0.10 USD.
  • Risk = volume × stop distance in pips × pip value.
  • Correct volume = chosen risk ÷ (stop in pips × pip value).