Lots, pips and currency units: how big one lot is and how to find the value of a pip
What lots, pips and currency units mean in forex: how big one lot is, which digit is one pip, and how to work out what one pip is worth.
Published ・ MyBrokerBonus Editorial
Order screens and bonus terms use words like “1 lot” and “20 pips” as if everyone knew them. These three ideas, the lot (the size of a trade), the pip (a unit for price movement) and the currency unit (how many units of a currency you buy or sell), are the base for every margin and profit calculation that follows. This guide takes each one in turn and shows how to work out the numbers.
All numbers here are examples to show the method. Real sizes and digits can differ by broker and by symbol, so check the platform and the broker’s own information before you trade.
The lot counts the size of a trade
A lot is the unit for how much you buy or sell. For forex currency pairs, one lot is usually 100,000 units of the base currency, which is the first currency in the pair. Buy one lot of EUR/USD and you have bought 100,000 euros.
0.1 lot is 10,000 units, and 0.01 lot is 1,000 units. If you want to start small, use the smallest lot your broker allows.
Bar lengths are in proportion. Gold, indices and some brokers use other sizes, so check the contract size of each symbol.
Keep in mind that the size of a lot differs by symbol. For gold, silver, stock indices and crypto, one lot is not necessarily the same size as for a currency pair. In MT4 and MT5, right-click a symbol and open “Specification” to see its contract size (the size of one lot) and its minimum lot.
Point
The "lots" in a bonus's trading-volume condition are counted in this same unit. Some conditions count only currency pairs or leave gold out, so check which symbols count as well as how big they are.
The pip measures price movement
Prices are written as decimals. Saying “the price moved 0.0001” every time is clumsy, so the usual step is given its own name: the pip.
- For most currency pairs, 1 pip is 0.0001. If EUR/USD moves from 1.0850 to 1.0851, it has risen by 1 pip.
- For pairs that include the yen, 1 pip is 0.01. If USD/JPY moves from 150.25 to 150.26, it has risen by 1 pip.
- EUR/USD1.08501.0851The 4th decimal place
- USD/JPY150.25150.26The 2nd decimal place
- EUR/USD, 5-digit price1.085031.08513The extra last digit is a tenth of a pip
Many brokers now show one more digit (for example 1.08503 for EUR/USD, five decimal places). That last digit is a tenth of a pip. The number of digits shown depends on the broker and the account type.
A pip describes how far the price moved. It is not an amount of money. To turn it into money, you combine it with the lot size, as follows.
How to find what one pip is worth
The profit or loss for a 1 pip move comes from this formula:
Value of 1 pip = lots × units per lot × size of 1 pip
The result is in the second currency of the pair. If your account is in another currency, convert it at the current rate.
- Holding 1 lot of EUR/USD: 1 × 100,000 × 0.0001 = 10. Each pip the price moves adds or removes 10 US dollars.
- Holding 0.1 lot of USD/JPY: 0.1 × 100,000 × 0.01 = 100. Each pip the price moves adds or removes 100 yen.
The answer comes out in the second currency of the pair: US dollars for EUR/USD, yen for USD/JPY. If your account is in another currency, the real profit or loss is that amount converted at the current rate.
Here is a worked case. You buy 0.5 lot of EUR/USD and sell after the price has risen 20 pips. One pip is worth 0.5 × 100,000 × 0.0001 = 5 US dollars, so 20 pips is a profit of 100 US dollars. If it had fallen 20 pips instead, the loss would be the same size.
You do not have to do this by hand. Enter the pair and the lots in our pip value calculator and it gives the answer. For the whole profit or loss of a trade, use the profit and loss calculator.
Caution
Double the lots and the profit or loss for the same move in pips doubles too. Adding size because the price is "only a few pips away" also makes the loss bigger by the same share if the price goes the other way.
Choosing a lot size
It is easier to choose a lot size by starting from the money you can afford to lose.
- Decide how much you are willing to lose on one trade.
- Decide how many pips away from the current price your stop loss will sit.
- “Amount you can lose ÷ pips to the stop loss” is the value you can allow for each pip.
- Work back from that value to the number of lots, using the formula above.
Our position size calculator does this for you.
What to read next
Once lots make sense, the next question is what your account needs in order to hold that size. Leverage and margin explains how to find the margin required. For the steps to place an order in the platform, see how to place orders in MT4 and MT5.
Knowing lots also helps when you read a bonus’s trading-volume condition. See how to read bonus withdrawal conditions as well. The bonuses running now are collected in the bonus list.
Risks to keep in mind
Trading with leverage can lose money quickly, and a bonus does not change that. The larger the lot, the larger the profit or loss for the same price move. The calculations in this guide explain how things work and do not promise any profit. Trade small lots, and only with money you can afford to lose.
