Lesson 3 · Beginner · 7 min
Lots, pips and the value of a move
How trade volume is measured and how to know what you will gain or lose on a price move.
Lot
A lot is the standard trade size. In forex 1 lot = 100,000 units of the base currency, for gold — 100 ounces, for stocks — 100 shares. The minimum volume is 0.01 lot.
Pip
A pip is the smallest meaningful price change. For most currency pairs it is the fourth decimal place (0.0001), for yen pairs the second (0.01).
Example
EUR/USD rises from 1.0850 to 1.0900 — that is 50 pips. With 1 lot each pip is worth $10, so the result is $500. With 0.1 lot — $50.
Calculate before you trade
Knowing the pip value, you know in advance how much you will lose if the price reaches your Stop Loss. Use the pip value and position size calculators for this.
Key takeaways
- 1 forex lot = 100,000 currency units
- 1 EUR/USD pip at 1 lot ≈ $10
- Pip value defines the risk of a trade