Lots & Pips

What is lot?

A lot is a number of currency units. A standard lot equals to 100,000 units of a base currency. It means that if you want to trade 1 lot of EURUSD, you will need €100,000 to buy it. There are two other well-known lot sizes. they are a mini lot (10,000 units) and a micro lot (1,000 units). Some brokers even offer nano lots (100 units).

To open a trade, you will need to decide how much money to put into it. In other words, you decide how many units you want to trade. This trade size is calculated in lots. Remember: the price of a financial instrument may change but the lot size is always standard.

What is a pip?

A pip means “Percentage in Point”. It represents the smallest change a currency pair can make. Usually, a pair is counted in four decimal points so a quote of GBP/USD is given like this: 1.3463. However, there are some pairs that have 2 decimal points. For example, the US dollar/Japanese yen is quoted as 109.70.

A pip is represented by the last decimal of a price/quotation. If EUR/USD changed from 1.0800 to 1.0805, this would be a change of 5 pips. If USD/JPY changed from 120.00 to 120.13, this would be a change of 13 pips.

In CFD trading, your gains and losses can be calculated in pips. To calculate the profit or the loss, you basically multiply pips with lots. For some financial instruments, calculation method might differ or include other factors.