Most traders memorise that a pip is worth $10 on a standard lot of EUR/USD and move on. Then they open a USD/JPY trade, run the same mental maths, and quietly realise their position sizing was completely wrong. That moment of confusion is where the real education starts.

A pip — short for "percentage in point" — is typically the fourth decimal place in a currency pair's price. So if EUR/USD moves from 1.08500 to 1.08510, that's one pip. For JPY pairs, the convention shifts to the second decimal place, because the yen trades at a much smaller face value per unit.

CONCEPTPip value is not fixed — it changes with the pair, the lot size, and which currency is your account's base denomination.
WARNINGAssuming every pip is worth $10 across all pairs is one of the most common — and costly — position sizing errors in forex trading.
KEY IDEAThe quote currency always determines raw pip value — your account currency then determines what that's actually worth to you.

Here's how the calculation works. On a standard lot (100,000 units), the raw pip value equals: 0.0001 divided by the current price, multiplied by 100,000. For EUR/USD at 1.0850, that gives 0.0001 ÷ 1.0850 × 100,000 = $9.22 USD per pip. For USD/JPY at 149.50, it's 0.01 ÷ 149.50 × 100,000 = $6.69 USD per pip. The numbers are meaningfully different.

Pip Value Per Standard Lot (USD)051015EUR/USD$9.22USD/JPY$6.69GBP/USD$10.00USD/CAD$7.50

Once traders account for this, position sizing becomes consistent regardless of which pair they trade. The goal is typically to risk a fixed dollar amount per trade — say $100. If EUR/USD is worth $9.22 per pip, a 20-pip stop loss means roughly 0.54 standard lots. Run the same maths on USD/JPY and the lot size changes. Skipping this step means actual risk varies silently between trades. Deeper reading on the mechanics is available through Investopedia's pip explainer, through the Wikipedia entry on percentage in point, and through Investopedia's guide to lot sizes for full context on how unit size feeds back into every calculation.

Pip value isn't a footnote — it's the foundation every position size calculation is built on. Get it wrong silently, and your risk management numbers are fiction.

This content is for educational purposes only and does not constitute financial product advice. Past performance is not indicative of future results. Profit Logic Ltd (ACN 688 669 936) accepts no responsibility for errors or omissions in this content or anywhere on this website. Always seek advice from a licensed financial adviser before making investment decisions.