Pips, lots and leverage explained with examples
Pips measure how far price moved, lots decide how much each pip is worth, and leverage decides how much margin is locked to hold the trade. Get these three right and every other calculation becomes simple.
By the TradeFather education team · Updated 27 Oct 2026 · Educational content, not financial advice
- 1 pip = 0.0001 on most pairs and 0.01 on JPY pairs.
- On USD-quoted pairs, 1 standard lot ≈ $10 per pip, 1 mini ≈ $1, 1 micro ≈ $0.10.
- Leverage changes margin, not the pip value — your risk is set by lot size and stop distance.
What is a pip?
If EUR/USD moves from 1.0800 to 1.0815 it has moved 15 pips. If USD/JPY moves from 150.20 to 150.45 it has moved 25 pips, because JPY pairs use the second decimal.
Many brokers show a fifth decimal (or third on JPY). That extra digit is a pipette — one tenth of a pip.
Standard, mini and micro lots
| Lot | Units | Pip value on EUR/USD | 20-pip stop costs |
|---|---|---|---|
| Standard (1.00) | 100,000 | $10.00 | $200 |
| Mini (0.10) | 10,000 | $1.00 | $20 |
| Micro (0.01) | 1,000 | $0.10 | $2 |
Leverage and margin
Leverage lets you control a position larger than your deposit. With 1:30 leverage, a 0.10-lot EUR/USD trade (about $10,800 notional) needs roughly $360 of margin. With 1:100 it needs about $108.
The pip value is still $1 in both cases. Higher leverage simply frees margin — and makes it easier to open trades far too large for your balance. If your losses eat into the required margin, the broker can close positions automatically (a margin call or stop-out).
| Leverage | Margin for 1 standard lot EUR/USD at 1.08 |
|---|---|
| 1:10 | $10,800 |
| 1:30 | $3,600 |
| 1:100 | $1,080 |
| 1:500 | $216 |
From pips to the right lot size
- 1Choose your risk
e.g. 1% of a $500 account = $5.
- 2Measure the stop
e.g. 25 pips beyond the swing low.
- 3Divide
$5 ÷ 25 pips = $0.20 per pip.
- 4Convert to lots
$0.20 per pip on EUR/USD = 0.02 lots.
Frequently asked questions
+How much is 1 pip worth?
On USD-quoted pairs like EUR/USD, about $10 per standard lot. On other pairs it depends on the exchange rate; use the pip value calculator.
+What leverage should a beginner use?
Lower is safer. Many regulators cap retail leverage at around 1:30 on majors. Your real risk control is the lot size and stop-loss.
+What is 0.01 lot?
A micro lot: 1,000 units, about $0.10 per pip on EUR/USD.