Forex Pips, Lots and Leverage: The Math Every FX Trader Needs

How pips, pipettes and lot sizes work in forex, how to calculate pip value and position size, and how leverage and swap affect your results.

By the TradeThink teamNovember 13, 20263 min read

The foreign exchange market is the largest financial market in the world. Before placing a trade, you need three numbers: how far price can move (pips), how much you are trading (lots) and how much each pip is worth to you.

Pips

A pip is the standard unit of price movement in a currency pair.

For most pairs, a pip is the fourth decimal: EUR/USD moving from 1.0850 to 1.0851 is one pip.
For pairs quoted in Japanese yen, a pip is the second decimal: USD/JPY moving from 150.25 to 150.26 is one pip.
Many brokers quote an extra digit, a pipette, one tenth of a pip.

Lots

Lot	Units of base currency
Standard	100,000
Mini	10,000
Micro	1,000

Pip value

For pairs where the US dollar is the quote currency (such as EUR/USD, GBP/USD), pip value is simple:

Standard lot: 100,000 × 0.0001 = $10 per pip
Mini lot: $1 per pip
Micro lot: $0.10 per pip

For other pairs, convert using the current exchange rate. For USD/JPY at 150.00, a standard lot pip is 100,000 × 0.01 ÷ 150 ≈ $6.67.

Pairs that share a currency often move together, which matters for total exposure.

Position size in forex

Lots = Risk in money ÷ (Stop in pips × Pip value per lot)

Example: a $10,000 account risking 1% ($100), with a 25-pip stop on EUR/USD:

$100 ÷ (25 × $10) = 0.4 standard lots, or 4 mini lots.

See position sizing.

Leverage and margin

Forex brokers offer leverage, so a small margin deposit controls a large position. Regulators in many regions cap retail leverage on major pairs; in the US, retail forex is overseen by the CFTC and the NFA. High leverage does not change the correct position size. Size from your stop and risk, not from available margin. See leverage and margin.

Swap and spread

Spread: the difference between bid and ask, paid on every trade.
Swap (rollover): a daily interest charge or credit for holding positions overnight, based on the interest rate difference between the two currencies.

Both should appear in your journal as costs. See fees and commissions.

Watch shared currencies

Long EUR/USD and long GBP/USD are both short the US dollar. See correlation risk.

In TradeThink

Forex trades from MetaTrader 4 and 5, cTrader and other platforms can be imported with lot sizes, commissions and swaps, and P&L is converted into your account currency. Related: forex trading sessions.