Pip Value

Pip value tells you how much your account balance changes when a currency pair moves by one pip for a specific position size. The formula works because a pip is a tiny fraction of the quoted exchange rate, and multiplying that fractional move by the size of your trade converts the price change into money. In other words, it scales the pip movement from “price units” into the amount of currency you are actually trading.

Use this when you want to estimate risk, set stop-loss levels, or compare the dollar impact of different lot sizes before entering a forex trade. It is especially useful when sizing trades across pairs with different exchange rates or when your account currency is not the same as the quote currency.

• Using the wrong pip size for pairs involving JPY or other non-standard quotes
• Confusing lot size in units with standard lots, mini lots, or micro lots
• Forgetting that account currency conversion may be needed if the quote currency is different from the account currency