Free course · Lesson 4 of 14
Pips and position size
How price moves are counted, and how that turns into money.
| Account | Risk (1%) | Stop | Lot size (GBPUSD ≈ 1.32) |
|---|---|---|---|
| £1,000 | £10 | 10 pips | ≈ 0.13 lots |
| £10,000 | £100 | 10 pips | ≈ 1.32 lots |
| £50,000 | £500 | 10 pips | ≈ 6.6 lots |
Step by step
- Price on GBPUSD is quoted to four decimal places. A move from 1.32435 to 1.32535 is 10 pips: a pip is the fourth decimal place.
- Every trade has a stop loss, measured in pips. On this strategy it is 10 pips at most. Those 10 pips are what you risk on the trade: 1R.
- You decide the money first. Risk 1% of a £10,000 account and 1R is £100.
- Then the lot size makes 10 pips equal £100. On GBPUSD that is about 1.3 lots. A smaller account just uses a smaller lot size: the 10 pips never change.
Remember: Decide the stop in pips and the risk in money, then let the lot size join them. Never pick the lot size first.
Terms in this lesson
Tools and terms for this page
Free tools: Forex position size calculator · Pip value calculator