This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.
Why pip value matters
In the foreign exchange market, prices move in tiny steps called pips. Whether a 20-pip move is worth $2 or $200 depends on the size of your position and the currencies involved. Knowing the value of one pip lets you set a stop loss in dollars, size each trade to a fixed share of your account and avoid positions that are far larger than you intended.
Pips and lots
- A pip is 0.0001 for most currency pairs and 0.01 for pairs quoted in Japanese yen.
- A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.
The formulas
- Pip value (quote currency) = pip size × units
- Pip value (account currency) = pip value in the quote currency × conversion rate to your account currency
- Amount at risk = pip value × stop distance in pips
- Lots for a given risk = (balance × risk %) ÷ (stop in pips × pip value per lot)
- Margin = units × price × conversion rate ÷ leverage
When your account is in US dollars and the pair is quoted in dollars, such as EUR/USD or GBP/USD, the conversion rate is 1. For USD/JPY, the pip value is in yen, so divide by the USD/JPY rate. For a cross such as EUR/GBP, multiply by the GBP/USD rate.
Example
A US dollar account of $10,000 trading one standard lot of EUR/USD at 1.0850, with a 10-pip stop and 50:1 leverage:
- Pip value: 0.0001 × 100,000 = $10 per pip
- Amount at risk: 10 × $10 = $100, exactly 1% of the account
- Lots for a 1% risk: 1.00
- Margin required: 100,000 × 1.085 ÷ 50 = $2,170
Risk management basics
- Many traders risk 0.5 to 2% of their account per trade, so a losing streak does not wipe them out.
- Place the stop where the trade idea is proven wrong, then size the position to fit it, not the other way around.
- Spreads, commissions, overnight swap charges and slippage on fast moves add to the real cost.
Leverage and regulation
In the United States, retail forex is regulated by the CFTC and the NFA, which cap leverage at 50:1 on major currency pairs and 20:1 on others, and require dealers to register. Leverage multiplies losses as much as gains: with 50:1, a 2% move against you erases the whole margin. Regulators report that most retail forex traders lose money over time. Trade only money you can afford to lose, and be wary of offshore brokers and anyone promising steady profits.