Pips and Lots

A Pip Is a Distance

A pip is the market's shared unit for measuring a price move. On most currency pairs it is the fourth decimal place: EUR/USD going from 1.0850 to 1.0870 has moved 20 pips. On pairs quoted with fewer decimals, like USD/JPY, it is the second - 149.20 to 149.50 is 30 pips.

Most platforms also show a fifth digit, the 'point' or pipette, which is a tenth of a pip. It matters for spread quotes and for nothing else at this stage.

The critical thing: 'the price moved 50 pips' says nothing about your money. It is a distance, not an amount.

A Lot Is a Size

• Standard lot (1.00) - 100,000 units of the base currency.
• Mini lot (0.10) - 10,000 units.
• Micro lot (0.01) - 1,000 units, and the smallest most brokers allow.

And 'I opened one lot' says nothing about your risk either, because it depends entirely on where the stop is. Size alone is as incomplete as distance alone.

The Multiplication - Where the Money Appears

On a currency pair with the dollar as the quote currency, one pip is worth about $10 on a standard lot, $1 on a mini, $0.10 on a micro. So take a 30-pip stop, which is an ordinary distance on a major pair, and run it across sizes:

• 0.01 lots → 30 × $0.10 = $3 loss.
• 0.10 lots → 30 × $1 = $30 loss.
• 1.00 lot → 30 × $10 = $300 loss.

The market did exactly the same thing in all three lines. Only the size changed - and the loss changed a hundredfold. This is the whole subject in one table.

Gold Is Where the Surprise Lives

Gold is not quoted in pips the way currencies are, and people carry the currency habit over to it and get hurt.

One standard contract of XAUUSD is 100 ounces. So a one-dollar move in the price of gold is $100 on a full lot, $10 on 0.10, and $1 on 0.01.

Gold routinely moves twenty dollars in a day. On a full lot that is a $2,000 swing - on an account that might hold $5,000. Not a crash, not news: an ordinary Tuesday.

This is why the same 'one lot' is a modest position on EUR/USD and a dangerous one on gold. The words are identical; the arithmetic is not.

Do It in the Other Order

Beginners pick a size, then place a stop and hope the loss is tolerable. Reverse it, and the size stops being a choice at all:

• Decide the risk first - say 1% of a $2,000 account, which is $20.
• Decide where the stop technically belongs - say 40 pips away on a major pair.
• Divide: $20 ÷ 40 pips = $0.50 per pip → 0.05 lots.

The size fell out of the calculation. You did not choose it, and there is nothing left to argue with yourself about in the moment.

Every position-size calculator in existence, including the one on this site, is doing exactly this division. Understanding it means you can check the answer instead of trusting it.