Lots, Leverage & Pips
Welcome to the mathy-but-practical side of Forex 🔢💰. These three concepts decide how much money you can win-or lose-on every trade, so let’s nail them down in plain English.
Pip ≈ “Percentage in Point”
For most pairs it’s the 4th decimal place (0.0001).
Example: EUR/USD moves from 1.0950 → 1.0962 = +12 pips.
(JPY pairs use the 2nd decimal.)
Standard Lot
1 lot = 100,000 base units. On EUR/USD a single pip ≈ $10.
Mini Lot
0.1 lot = 10,000 units. Pip value ≈ $1.
Micro Lot
0.01 lot = 1,000 units. Pip value ≈ $0.10.
Leverage - Your Double-Edged Sword ⚔️
Brokers let you control a large position with a small deposit (margin).
1 : 50 means every $1 of margin controls $50.
// Example
Trade: 1 mini lot (10,000 EUR) on EUR/USD
Leverage: 1 : 50
Required margin = (10,000 × 1 .0950) ÷ 50 ≈ $219
Pip value = $1 → 30 pip stop-loss = risk $30See how a tiny price move magnifies into real dollars? Keep your risk per trade in check!
Quick Cheat-Sheet 📋
| Lot Type | Units | Pip Value (EUR/USD) | Margin @ 1 : 50 |
|---|---|---|---|
| Standard | 100 k | $10 | ≈ $2 190 |
| Mini | 10 k | $1 | ≈ $219 |
| Micro | 1 k | $0.10 | ≈ $22 |
Heads-up: High leverage feels exciting, but a 5 pip move against you on a standard lot is already $50. Always size positions using your risk % and stop-loss distance-never by gut feel.