Pip

A pip is only a distance. It becomes money once you multiply it by your trade size, and that multiplication decides how much a stop loss costs you. If you get it wrong, you can risk ten times more than you planned.

Which digit in the quote is the pip

On most pairs the pip is the fourth decimal. On yen pairs it is the second decimal. Many brokers show one extra digit after it, called a pipette, which is one tenth of a pip.

The picture below marks the pip digit in two illustrative quotes. If EUR/USD moves from 1.0842 to 1.0862, it has moved 20 pips.

Where the pip sits in a EUR/USD quote and a USD/JPY quote

Gold (XAUUSD) has no single convention. Some brokers and traders call a 0.01 move a pip, others a 0.10 move. So ignore the word and ask one question: if gold moves 1.00 dollar, how much does my position gain or lose? Your broker's contract specification answers it.

The pip value formula

Pip value is what one pip of movement is worth on your trade.

Pip value = pip size × position size in units

The result is in the quote currency, the second currency in the pair. A standard lot is 100,000 units, so on a pair quoted in USD: 0.0001 × 100,000 = $10 per pip.

If your account currency is the base of the pair (USD/JPY on a USD account), divide by the pair's price. Otherwise convert the quote currency into your account currency at its current rate. The yen example in the next section shows the first case.

To size a trade, turn the formula around:

Lots = money at risk ÷ (stop in pips × pip value of 1 lot)

You never set a pip directly. In the order window you set the volume in lots and the stop loss as a price or a distance, and together they fix the money per pip.

Pip value by lot size: quick reference

These values apply to any pair quoted in USD, such as EUR/USD or GBP/USD. A mini lot is a tenth of a standard lot, a micro lot a hundredth.

Pips into dollars on a 500, 5,000 and 50,000 USD account

The figures here are an illustrative example. You risk 1% of the account, your stop is 20 pips away, and you trade EUR/USD, where one standard lot is worth $10 per pip.

5,000 USD account

The calculation below shows the 5,000 USD account.

From a 20-pip stop to a lot size on a 5,000 USD account

Risk in money$5,000 × 1%= $50

Affordable value per pip$50 ÷ 20= $2.50

Lots$2.50 ÷ $10= 0.25

Order size0.25 lots

The one-line lot formula gives the same answer: $50 ÷ (20 × $10) = 0.25 lots.

500 USD account

1. Money at risk: $500 × 1% = $5.
2. Per pip: $5 ÷ 20 = $0.25.
3. Lots: $0.25 ÷ $10 = 0.025. Round down to 0.02 lots if your broker's smallest step is 0.01 lots, which is $0.20 per pip and $4 at risk.

50,000 USD account

$500 ÷ (20 × $10) = 2.50 lots.

The stop is 20 pips in all three cases. Only the lot size changes, and that is what keeps the loss at 1%.

Always round down. If the result is below the smallest size your broker accepts, the trade is too large for the account at that stop, so skip it instead of rounding up.

5,000 USD account on a yen pair

At a USD/JPY rate of 150.00, one standard lot gives 0.01 × 100,000 = 1,000 yen per pip. Converted: 1,000 ÷ 150 = $6.67 per pip, not $10. The affordable value per pip is still $50 ÷ 20 = $2.50, so the size is $2.50 ÷ $6.67 = 0.37 lots, against 0.25 on EUR/USD. That gap is why you cannot assume $10 per pip.

Pip mistakes that change your risk

• Mixing up pips and points. On a five-decimal quote, a point is the last digit, so 20 pips is 200 points. If you type 20 into a field that expects points, your stop sits 2 pips away. The other way round costs more: type 200 into a field that counts pips and your stop is 200 pips away, so the same lot size loses ten times the money you planned.
• Judging results in pips. A 50-pip gain on 0.01 lots is $5. A 10-pip loss on 1.00 lot is $100. Track money or percent of account.
• Treating pip value as fixed on pairs not quoted in USD. On a pair like USD/JPY the value per pip drifts as the rate moves. Recheck it before each trade, not once.

Pips vs points: how a wrong stop-loss field moves the stop to 2 pips or 200 pips instead of 20

FAQ